Bond Yields, Dow Industrials Move Upward
Stocks ended mostly higher Thursday, led by blue chips, as investors were cheered by some positive economic news.
In other trading, Treasury bond yields rebounded sharply after a disappointing auction of new 10-year notes. Oil prices jumped on fresh predictions of higher global demand.
The Dow Jones industrial average climbed 85.50 points, or 0.8%, to 10,749.61, its highest close of 2005, after the government said weekly unemployment claims declined and that the nation’s trade deficit narrowed in December amid rising exports.
Most broader indexes also gained after an early slide. The tech-heavy Nasdaq composite was barely positive, inching up 0.55 point, or less than 0.1%, to 2,053.10. The Standard & Poor’s 500 was up 5.02 points, or 0.4%, to 1,197.01.
Winners topped losers by 5 to 4 on the New York Stock Exchange, while losers had the edge on Nasdaq.
Recent moves by a number of big-name companies have heartened investors’ expectations for blue-chip shares. Hewlett-Packard, for example, on Wednesday ousted its controversial chief executive. On Thursday, Sara Lee shares jumped 4% after the company said it would restructure.
The Dow now is off 0.3% year to date, having recouped most of its early-January losses.
But Nasdaq still is off 5.6% this year, amid investor concern about the growth prospects of tech giants such as Cisco Systems.
The stock market largely ignored a jump in oil prices after the International Energy Agency said global demand is increasing faster than expected.
Oil consumption is predicted to be 84 million barrels a day this year, 120,000 barrels more than the agency forecast last month.
Near-term crude futures in New York surged $1.64 to $47.10 a barrel.
Wall Street also was relatively unruffled by a turnaround in Treasury bond yields, which had been tumbling in recent weeks.
The bond market was hurt by the upbeat economic news and by an unenthusiastic reception for $14 billion in new 10-year T-notes, which were sold at a yield of 4.05%.
Indirect bidders, which include foreign central banks, bought 28.5% of the securities, which was “a bit on the low side, a bit of a disappointment, but it wasn’t disastrous,” said Brian Edmonds, head U.S. Treasury trader at Banc of America Securities in New York.
The sale Thursday was the final installment in a sale of $51 billion in new Treasury securities.
The yield on the existing 10-year T-note jumped to 4.07% from 3.98% on Wednesday, which had been the lowest since Oct. 25. Yields also rose on shorter-term Treasury issues.
Some investors have been snapping up long-term bonds lately on expectations that the economy would slow and that the Federal Reserve may be getting near the end of its credit-tightening campaign. Also, pension funds increasingly are seeking to lock in yields on bonds to match long-term liabilities to retirees, some analysts say.
But with yields at current levels, “There’s very little incentive to keep buying Treasuries,” said Gary Pollack, who oversees $12 billion in bonds at Deutsche Bank Private Wealth Management in New York.
Among Thursday’s market highlights:
* The Dow was led higher by insurer American International Group, up $3.28 to $72.59 after its strong quarterly earnings report this week.
* Other blue chips attracting buyers included Honeywell, up $1.06 to $38.46; Caterpillar, up $1.42 to $92.06; and United Technologies, up $2.16 to $102.66.
* Cisco Systems slipped 5 cents to $17.58, continuing to pull back after its disappointing sales forecast on Tuesday.
Other tech issues losing ground included Microsoft, off 1 cent to $26.06; Computer Sciences, down $1.52 to $47.96; and Google, off $3.60 to $187.98.
* Most energy stocks rallied with oil. ChevronTexaco jumped $1.24 to $57.40, Sunoco rose $2.82 to $94.70 and Southwestern Energy soared $3.26 to $57.71.
Los Angeles-based Occidental Petroleum surged $2.08 to $63.37 after raising its quarterly dividend 13%, to 31 cents a share.
* El Segundo-based Big 5 Sporting Goods slumped $1.68 to $25.50 after the retailer said 2005 profit would be below analysts’ estimates.
* Krispy Kreme Doughnuts sank $1.15 to a five-year low of $6.06 amid concerns that the troubled company could file for Bankruptcy Court protection. The company declined to comment.
* Shares of Fannie Mae and Freddie Mac dropped after John Weicher, assistant secretary for the U.S. Housing and Urban Development department, said the mortgage giants were falling short of their core mission to help more low-income Americans buy homes. Fannie Mae fell $1.65 to $61.19; Freddie Mac dropped $3.32 to $63.39.
