Stocks End Mixed on Inflation, Rate Worries
Stocks and bonds struggled through a volatile session Thursday to close mixed on continued worries about inflation and higher interest rates.
Oil rose on fears of terrorist attacks in Saudi Arabia.
The Dow Jones industrial average added 19.51 points, or 0.2%, to 10,397.46 after falling as low as 10,322. The Standard & Poor’s 500 index was up less than one point to 1,128.84.
The Nasdaq composite sank 22.68 points, or 1.1%, to 2,002.17, the fifth loss in seven sessions.
Falling stocks outnumbered winners by a slight margin on the New York Stock Exchange and by more than 3 to 2 on Nasdaq.
Analysts said the market’s recent troubles reflected that many investors were too optimistic in bidding prices higher in late March in anticipation of strong first-quarter earnings.
Though earnings have indeed been robust, investors “had not factored in other influences -- a close election, geopolitics, interest rate changes -- and the result is this volatility,” said Subodh Kumar, chief investment strategist for CIBC World Markets.
Treasury bond yields have surged over the last two weeks on fears that the accelerating economy will force the Federal Reserve to tighten credit soon.
Rising inflationary pressures also have spooked bonds. On Wednesday, the government said the consumer price index rose at an annualized rate of 5.1% in the first quarter.
Bond yields ended mostly higher Thursday, despite news that more Americans filed for jobless benefit claims last week -- a report that could mean the job market isn’t recovering fast enough to justify tighter credit.
Investors also weren’t swayed by comments from Fed Gov. Ben Bernanke, who said a gap between the economy’s potential and actual growth rates should keep inflation from accelerating.
The 10-year Treasury note closed at 4.40%, up from 4.36% on Wednesday and the highest since Dec. 3. But the two-year T-note edged down to 2.06% from 2.07% on Wednesday.
In other trading, near-term crude oil futures in New York jumped 85 cents to $37.57 a barrel after the U.S. government ordered non-essential diplomats to leave Saudi Arabia, citing the threat of terrorist attacks.
But gold didn’t benefit from terrorism worries. Near-term futures lost $2.10 to $397.70 an ounce in New York, bringing the three-day decline to $22.40.
Gold has weakened as the dollar has rebounded on optimism about the U.S. economy.
Among Thursday’s market highlights:
* Many financial-services stocks continued to weaken on interest rate concerns. Citigroup slid $1.03 to $49.92, Merrill Lynch eased 64 cents to $57.20 and student loan firm Nelnet dropped $2.50 to $22.
* Some investors turned to classic “defensive” stocks, issues that are expected to fare well even in a period of higher interest rates. Those include drug and consumer-products issues.
Among the gainers were Eli Lilly, up $2.49 to $72.90; Merck, up $1.54 to $46.98; Clorox, up 99 cents to $52.13; and Hershey Foods, up $1.09 to $84.38.
* In the tech sector, semiconductor stocks were broadly lower. Cypress Semiconductor fell $2.60 to $17.75, International Rectifier slid $2.15 to $46.39 and Intel was off 71 cents to $26.66.
But investors flocked to Apple Computer after its strong earnings report. Apple shares surged $2.66 to $29.30.
* Health-maintenance organization stocks tumbled after UnitedHealth Group said slow U.S. job growth might limit its membership growth. UnitedHealth slumped $2.95 to $63.95, WellPoint Health dropped $2.80 to $112 and Aetna was down $4.62 to $85.74.
