Stocks Slip as Bond Yields, Oil Prices Rise

Stocks declined Thursday, but the losses were modest in the face of significant jumps in Treasury bond yields and oil prices.

The Dow Jones industrial average edged down 28.02 points, or 0.3%, to 11,025.51.

In other trading, the euro hit a one-month high against the dollar after the European Central Bank raised its key short-term interest rate and signaled that there might be more increases ahead.

Gold and silver prices surged.

The European rate hike helped send bond yields higher on the Continent and in the U.S. The 10-year Treasury note yield rose to 4.63%, up from 4.58% on Wednesday and the highest since November.

The six-month T-bill ended at 4.75%, up from 4.74% on Wednesday and the highest since 2001.

“We have Europe and possibly Japan raising rates,” said Michael Materasso, a senior portfolio manager at Franklin Templeton Investments. Additionally, the Federal Reserve “may have to go further” in raising its key rate, he said. “All of this has put pressure on the Treasury market as well as global fixed-income markets.”

But stock investors seemed largely unfazed by the turmoil in the bond market. The Standard & Poor’s 500 index eased 2.10 points, or 0.2%, to 1,289.14. The Nasdaq composite slipped 3.53 points, or 0.2%, to 2,311.11.

Losers outnumbered winners by about 5 to 4 on the Big Board. Trading was heavy.

Rising bond yields normally would depress stocks, but one reason rates are going up this year is that the global economy appears resilient, which could underpin corporate earnings growth.

Still, February retail sales reports issued Thursday raised some red flags about consumer spending, analysts said. Shares of Target slid 86 cents to $53.71; Gap lost 38 cents to $18.28.

Another jump in crude oil prices also may have fanned concerns about the consumer.

Near-term crude futures in New York rose $1.39 to $63.36, the highest in more than three weeks, as Venezuela continued to call for production cuts by the Organization of the Petroleum Exporting Countries.

OPEC President Edmund Daukoru said he believed that world oil markets were oversupplied, but he said it was too early to say what the cartel might do.

In currency trading, the euro rallied to $1.203 in New York from $1.192 on Wednesday. Higher European interest rates could attract more capital to the Continent, boosting its currency.

But European stocks were mostly lower. The main German share index fell 1.4%. The Spanish market lost 0.8%.

Among other market highlights:

* Gold rose as the dollar declined. Near-term gold futures in New York were up $4.70 to $568.20 an ounce.

Silver shot up 42 cents to $10.13 an ounce, the highest since 1984, on speculation that a new U.S. exchange-traded silver fund would be approved soon. That could boost demand for the metal.

* Auto-related issues lost ground after parts maker Dana missed a bond payment, raising the risk of bankruptcy. Dana slid 81 cents to $1.04.

General Motors fell 49 cents to $19.41 and Ford Motor dropped 29 cents to $7.66.

* Mortgage lenders were under pressure as bond yields rose. Impac Mortgage lost 26 cents to $8.16, FirstFed Financial slumped $3.15 to $57.72 and Downey Financial dropped $1.48 to $63.38.

* Fluor tumbled $6.01 to $81.80 after the engineering giant’s quarterly earnings report disappointed Wall Street. The stock still is up 6% this year.

* Many semiconductor issues continued their recent rally. Advanced Micro Devices jumped $1.26 to $41.33 and International Rectifier gained $1.12 to $40.08.

* Many energy issues and other commodity-related stocks were strong. ConocoPhillips rose $1.01 to $62.78 and Berry Petroleum added 88 cents to $69.27. Steel maker Nucor rose $1.44 to $88.95 and mining firm Rio Tinto was up $1.91 to $192.01.

* In the retail sector, Chico’s FAS plunged $6.41 to $41.35 after the company said investment in some of its brands could hurt earnings this year.