Early Stock Rally Sputters
A jump in productivity, its biggest surge in two years, drove stocks higher for much of the session Tuesday, but a late sell-off left key indexes up just modestly.
In other trading, Treasury bond yields sank on the productivity news. Gold hit another 22-year high.
Investors welcomed word from the Labor Department that U.S. workers’ productivity rose 4.7% in the third quarter, an upward revision from an initial estimate of 4.1%.
Strong productivity growth damps worries about inflation and boosts optimism about corporate earnings, analysts noted.
“The economy can grow pretty well, and earnings will be even better, because of the improvement in productivity,” said Al Kugel, who helps oversee $17 billion as the chief investment strategist at Atlantic Trust/Stein Roe in Chicago.
The Dow Jones industrial average was up as much as 101 points at midday and held on to most of that gain into the final hour of trading. Then came a sell-off, which many traders were hard-pressed to explain.
The Dow ended with a gain of 21.85 points, or 0.2%, to 10,856.86.
Broader indexes also closed higher, but well off their peaks for the day. The Standard & Poor’s 500 added 1.61 points, or 0.1%, to 1,263.70. The Nasdaq composite was up 3.12 points, or 0.1%, to 2,260.76.
The New York Stock Exchange composite edged up 0.2% to another record high.
Winners topped losers by about 5 to 4 on the NYSE.
After a strong rally in November, the market has been under pressure this month from rising oil prices and higher bond yields.
Oil continued to creep up, with near-term futures rising 3 cents to a one-month high of $59.94 a barrel in New York.
But bond yields slid. The 10-year Treasury note ended at 4.48%, down from 4.56% on Monday. The productivity data stoked optimism that the Federal Reserve might be done tightening credit soon, some analysts said.
Still, the central bank is expected to raise its key short-term rate from 4% to 4.25% when policymakers meet Tuesday.
In metals trading, near-term gold futures continued their recent rally, adding $1.30 to $510.20 an ounce, highest since 1983.
“That same demand that we’ve been seeing for weeks now continues to underpin” gold, said Dave Meger, an analyst with Alaron Trading Corp.
In other market highlights:
* Technology shares led Tuesday’s gains as two computer chip makers, Altera and Maxim Integrated Products, raised sales projections.
Altera, the world’s second-largest maker of programmable semiconductors, rose $1.10 to $19.40. The company said that fourth-quarter sales would be $286 million to $297 million and that gross margin, a measure of profitability, would be 66.5%. Altera had predicted $292 million in sales and a margin of 66%.
Maxim Integrated, a maker of chips for consumer electronics, climbed $1.56 to $39.06. It said fiscal second-quarter sales would rise 5% to $446 million. The company had forecast a 4% increase.
* Apple Computer jumped $2.23 to a record $74.05. The company started selling “Law & Order” and other top-rated NBC shows on its iTunes Music Store to help spur sales of its iPod video players. Faster sales growth from the video iPods, as well as iMac computers, will drive profit, a UBS analyst said in a report. The analyst raised his first-quarter profit estimate for Apple to 58 cents a share from 54 cents and predicted the stock would reach $86 in the next year.
* Devry sank $2.52 to $21.87 after the education-services firm reported disappointing enrollment data. Also, Career Education slid $4.62 to $34.22 after saying that its American Intercontinental University unit had been placed on one-year probation by an association that accredits schools in Southern states.
* Sears Holdings posted sharply lower profit from the previous year but still beat Wall Street forecasts for the quarter. The stock rose $6.26 to $122.97.
* Commodity-related shares remained in strong demand. Deltic Timber rose 54 cents to $46.87, a record high. Mining firm Buenaventura jumped $1.15 to $30.50 and Newmont Mining surged $1.91 to $48.75.
* Some big-name biotech stocks were weak. Amgen lost 91 cents to $79.78, Genentech dropped $2.38 to $97.28 and Genzyme slid $1.11 to $73.62.
* Mexico’s main market index hit another new high, rising 0.9% to 17,424.43. It is up 35% this year.
