Stocks, Bond Yields Rise

Consumers keep spending and the stock market keeps climbing. And ditto for oil prices and interest rates.

Wall Street on Tuesday cheered a government report showing that consumer spending rose a sharp 0.8% in June -- even though one effect of that rise was that Americans’ official savings rate fell to zero.

The Standard & Poor’s 500 and the Nasdaq composite indexes both hit four-year highs, and several other market indexes hit record levels, continuing the winning streak of the last few months. Shares also were mostly higher overseas, even as oil prices set a new record.

But the upbeat news on the economy kept upward pressure on interest rates in the Treasury bond market and made it more likely that the Federal Reserve wouldn’t stop tightening credit anytime soon, analysts said.

The S&P; 500 gained 8.77 points, or 0.7%, to 1,244.12, adding to the steady rally that has lifted the blue-chip index 9.4% since April 20.

The technology-dominated Nasdaq composite rose 22.77 points, or 1%, to 2,218.15. It is up 15.9% since April 20.

The 30-stock Dow, which has lagged behind other market gauges in recent months, did so again Tuesday. It added 60.59 points, or 0.6%, to 10,683.74.

Among broader indexes, all-time highs were reached by the New York Stock Exchange composite and by measures of smaller stocks, including the Russell 2,000 and the S&P; 600.

Rising stocks outnumbered losers by 2 to 1 on the NYSE and by 3 to 2 on Nasdaq.

The market this summer has been underpinned by stronger-than-expected corporate earnings reports and by mostly positive data on the economy. Investors have chosen to look past the bad news -- including terrorist attacks in London, rising interest rates and record oil prices, said Joseph Keating, chief investment officer at AmSouth Bancorp in Birmingham, Ala.

“I think it’s absolutely amazing that we had as strong a July as we did,” given those negatives, Keating said. The continuing rally, he said, showed that investors were betting that the economy would continue to advance, pulling earnings up as well.

“People are saying, ‘It’s time to get into the game and put some money to work,’ ” he said.

Standard & Poor’s on Tuesday said operating earnings for the S&P; 500 companies were on pace to rise 12% in the second quarter from a year earlier, which would mark the 13th straight double-digit quarterly advance. At the beginning of July, analysts had expected an 8% gain in the quarter.

Optimism about the economic expansion was reinforced Tuesday by the report on consumer spending in June. Americans stepped up their purchases of goods and services even as oil prices resurged.

On Tuesday, crude futures in New York edged up 32 cents to a record $61.89 a barrel. The price has jumped nearly $15 a barrel since May 19 on supply fears.

Interest rates also have been rising at a brisk pace for the last five weeks, mirroring the pickup in the economy. The benchmark 10-year Treasury note yield ended at 4.34% on Tuesday, up from 4.31% on Monday and the highest since April 13.

Federal Reserve policymakers meet Tuesday and are expected to raise their key short-term rate for the 10th time since June 2004, from 3.25% to 3.5%.

For now, Wall Street is signaling that it can live with higher rates. And the breadth of the stock market’s advance this summer suggests that the rally could build on itself in the near term, some analysts say.

“We have been looking for a short-term pullback, but it may have to come from higher levels,” said Steve Todd, editor of the Todd Market Forecast in Mission Viejo.

Among the day’s highlights:

* Semiconductor stocks led the tech sector higher and lifted the SOX chip-stock index 2.5% after Maxim Integrated gave a bullish business outlook. Maxim jumped $3.49 to $45.50, Texas Instruments rose 77 cents to $32.66 and National Semiconductor gained $1.10 to $25.71.

* Many commodity-related stocks continued to rally on optimism about the economy. Iron ore miner Cleveland-Cliffs rose $3.19 to $77.60 and U.S. Steel was up $1.28 to $44.01. Energy stocks also were broadly higher.

* Utility stocks resumed their advance, driving the Dow utility index up 2.5% to 402.41, its highest closing level since 2000.

* Microsoft, a laggard for much of this year, surged 89 cents, or 3.4%, to $26.81 -- its highest since January -- on speculation that it might pay another large cash dividend.

* Overseas, multiyear highs were reached by key indexes in markets including Germany, Britain, Hong Kong and Mexico.