Treasury Bond Yields Jump
U.S. Treasury yields surged Thursday after reports of sharply lower claims for jobless benefits and stronger factory output in the East raised more concerns about inflation and about the Federal Reserve’s credit-tightening plans.
The dollar rose the most in almost four months against the euro and gained versus the yen after a report showed the U.S. current-account deficit grew less than forecast in the third quarter. The current account is the broadest measure of the nation’s trade balance.
Stocks finished Thursday’s session mixed. The Dow Jones industrial average rose 14.19 points, or 0.1%, to 10,705.64. It was the first close above 10,700 since Feb. 17.
Broader market gauges were moderately lower. The Standard & Poor’s 500 index was down 2.51 points, or 0.2%, at 1,203.21, while Nasdaq lost 16.40 points, or 0.8%, to 2,146.15.
Decliners outnumbered advancing issues by about 9 to 5 on the New York Stock Exchange.
The jump in Treasury yields was triggered by a wave of selling spawned by the Philadelphia Federal Reserve’s latest factory output survey and by a Labor Department report showing new claims for unemployment insurance plummeted by 43,000 last week to a five-month low of 317,000.
The reports suggested that the economy could be speeding up, which could fan inflation worries and drive the Fed to raise short-term rates more quickly.
The yield on the benchmark 10-year Treasury note shot up to 4.19% from 4.08% on Wednesday.
“There are some profit-taking pressures coming into the market,” said David Ging, fixed income strategist at Credit Suisse First Boston.
The nation’s current account deficit climbed to a record high of $164.7 billion in the third quarter, reflecting robust demand for imported oil and foreign-made goods. Yet the news was considered good because it came in well below the $171 billion economists had expected.
The euro slumped to $1.325 from $1.341 on Wednesday. Against the yen, the dollar rose to 104.78 from 104.23.
In other market highlights:
* Oil remained steady at $44.18 a barrel, down a penny.
* Johnson & Johnson rose $2.55 to $63.45 after confirming a long-rumored plan to buy Guidant, one of the world’s top makers of cardiac devices, for about $25.4 billion in cash and stock. Guidant, which makes pacemakers and cardiac defibrillators, lost 35 cents to $71.70.
* Goldman Sachs Group fell $3.85 to $105.40 despite a 23% rise in fiscal fourth-quarter profit. Earnings beat Wall Street estimates, but revenue fell short.
* Fannie Mae slid $1.39 to $69.30 after the Securities and Exchange Commission found it had violated accounting rules and must restate earnings.
