Stocks Rise as Bond Yields Fall

Stocks rallied Thursday after a record Treasury auction pushed bond yields lower, allaying fears that foreign investors would move away from U.S. debt.

Wall Street also was helped by lower oil prices and sheer momentum, as the Standard & Poor’s 500 index passed a price ceiling that usually triggers selling.

For the most part, however, the news that sent stocks soaring in late afternoon was nearly identical to the news that sent stocks sideways in the morning.

“We were scratching our heads,” said Brian Williamson, an equity trader at Boston Co. Asset Management, a Mellon subsidiary.

The Dow Jones industrial average rose 93.89 points, or 0.9%, to 10,640.10.

Broader stock indicators were also higher. The Standard & Poor’s 500 index rose 10.31 points, or 0.8%, to 1,230.96, and the Nasdaq composite index rose 20.87 points, or 1%, to 2,196.68.

Advancing issues outnumbered decliners by about 9 to 6 on the New York Stock Exchange.

Yields on bonds fell as their prices rose amid strong demand by foreign investors and others during the federal government’s auction of 10-year U.S. Treasury notes.

The $13 billion in new 10-year notes were sold at a yield of 4.578% and garnered bids for 2.24 times the amount of debt being auctioned.

That was below the recent average, but traders were focused on another number -- bids from so-called indirect bidders, which include customers of primary dealers as well as foreign central banks.

Indirect bids added up to a record 54.8% of the notes, easing fears of investors after two auctions of shorter-term bonds this week failed to attract intense foreign demand.

“The auction was fantastic,” said Michael Franzese, head of U.S. Treasury trading at Zions First National Bank in Jersey City, N.J.

The yield on the 10-year Treasury note, a benchmark for mortgage rates, plunged to 4.54%, from 4.64% on Wednesday.

Stocks have been crawling sideways for much of the year, and investors are hoping for the kind of fourth-quarter rally they’ve seen the last two years.

Falling oil prices, which helped push energy-company stocks lower in the morning, were a catalyst for the afternoon rally, when retailers gained as consumer spending worries were temporarily forgotten.

“We all look for catalysts, but sometimes markets go up because they’re ready to go up,” said John P. Waterman, chief investment officer at Rittenhouse Asset Management.

Economic news was mixed. The University of Michigan’s mid-month report on consumer sentiment for November increased from October’s levels.

Analysts said the Michigan report showed that shoppers were still spending freely even though their sentiment was less optimistic.

The Commerce Department said September’s trade deficit widened 11.4% from August to $66.1 billion, pushed higher by increased oil imports following the Gulf Coast hurricanes and a record trade deficit with China.

Meanwhile, the number of Americans who lost their jobs in the hurricanes’ aftermath rose to 542,000 last week.

In other market highlights:

* Home builders and mortgage companies gained as falling bond yields signaled a possible reversal in the recent trend of rising interest rates.

KB Home climbed $2.29 to $65.12, Lennar gained $1.78 to $56.28 and Pulte Homes rose $1.43 to $38.50.

Among lenders, Countrywide Finance was up $1.53 to $33.14 and IndyMac Bancorp gained $1.43 to $36.98.

* Energy companies saw sharp drops as oil prices fell $1.13 a barrel to $57.80. Exxon Mobil dropped $1.05 to $56.45, BP retreated $1.30 to $64.30 and Conoco lost $2.20 to close at $63.39.

* Lower energy costs could be a boon to retailers. Wal-Mart increased 84 cents to $49.04, while Costco advanced $1.41 to $50.06.

Target climbed $2.29 to $58.85 after it reported an 18% drop in third-quarter earnings, beating analysts’ estimates. The company reaffirmed its forecast for the second half of its fiscal year, which ends in January.

* General Motors shares, already at a 13-year low, tumbled $1.12 to $23.51 after the company said late Wednesday that it would restate its 2001 earnings because an accounting error led it to overstate profit by as much as $400 million.