Stocks Finish Mixed as Bond Yields Climb
Stocks ended mixed and bond yields rose Monday, as some investors pulled back before the Federal Reserve’s expected interest-rate hike today.
In other trading, metal prices rallied sharply, driving silver to a fresh 22-year high and copper to a record high.
On Wall Street, the Dow Jones industrial average eased 29.86 points, or 0.3%, to 11,250.11 in a lackluster session.
Broader indexes also were little changed, although the Russell 2,000 small-stock index crept up to a record, adding 0.20 of a point to 754.03 and bringing its year-to-date gain to 12% -- the best of any major market index.
The Standard & Poor’s 500 slipped 1.34 points, or 0.1%, to 1,301.61; the Nasdaq composite was up 2.76 points, or 0.1%, to 2,315.58.
Losers edged out winners on the New York Stock Exchange.
Despite Monday’s weakness, stocks overall are on track for a strong first quarter, which some analysts say reflects investors’ belief that the economy is healthy and that the Fed soon will halt its credit-tightening campaign. The Dow is up 5% year to date, its best start since 1999.
The Fed today is expected to raise its benchmark short-term interest rate to 4.75% from 4.5%, the 15th increase since mid-2004. The main issue for investors is the signal that policymakers will give in their post-meeting statement as to their future intentions.
Some analysts believe the Fed could lift its rate as high as 5.5% this year to combat inflation pressures. Others say that if the housing market continues to slow, the Fed could stop at 4.75%.
John Maskell, a money manager at Barclays Global Investors in London, said he saw a “good chance the central bank will raise [today] and change their language to indicate rates are on hold until we get clearer signs from the economic data.”
If he’s right, Maskell said, “we could get a little rally in Treasuries,” meaning a decline in yields.
The 10-year T-note yield rose Monday to 4.7% from 4.67% on Friday. The yield has fallen from a 21-month high of 4.77% on March 13 as some investors have bet that the Fed is nearly done.
The Treasury on Monday sold $22 billion of new two-year notes at a yield of 4.73%.
In commodities trading, near-term crude oil futures in New York slipped 10 cents to $64.16 a barrel after reaching the highest price in nearly seven weeks on Friday.
The hot action was in the metal markets.
Near-term silver futures jumped 16 cents to $10.85 an ounce, the highest since 1983, continuing a rally that has lifted the price 23% this year. Gold futures gained $7 to $567 an ounce.
Silver got a boost last week, after the Securities and Exchange Commission gave preliminary approval to a new exchange-traded fund that would invest directly in the metal.
Metals and many other commodities have racked up big gains over the last two years, fueled in part by heavy demand from China, India and other emerging-market economies.
Copper and zinc both hit record highs on Monday in London trading. “People are positive on the demand side of these metals as the global economy grows,” said Jon Bergtheil, head of global metal strategy at JPMorgan Securities in London.
Among Monday’s highlights:
* In the mining sector, Phelps Dodge rose $1.47 to $76.61, Aluminum Corp. of China jumped $3.96 to $106.85, Rio Tinto gained 85 cents to $199.45 and Freeport-McMoRan Copper & Gold gained $2.50 to $56.19.
* Steel stocks also added to their 2006 gains. Steel Dynamics soared $3.26 to $54.62 and Nucor jumped $2 to $104.32.
* Utility stocks were broadly lower, pushing the Dow utility stock index down 3.55 points, or 0.9%, to 396.19, its lowest level since November. Rising bond yields could dim utilities’ appeal with some investors because the stocks generally are chosen for their dividend yields.
Dominion Resources lost 95 cents to $70.60 and FirstEnergy slid 54 cents to $49.75.
* In the medical products sector, Zimmer Holdings, the world’s No. 1 maker of artificial hips and knees, dropped $2.55 to $66. Stryker, the third-biggest maker of those products, lost $2.67 to $44.78. Both stocks were cut to “neutral” from “overweight” by brokerage JPMorgan, which warned of a “decelerating growth environment.”
* Brokerage stocks continued to attract buyers. Goldman Sachs jumped $2.83 to a record $155, Bear Stearns rose 91 cents to a record $139.05 and Merrill Lynch was up 91 cents to $78.46.
* Time Warner Telecom rose $1.24 to $16.89. The owner of a fiber-optic network connecting 44 U.S. cities was upgraded to “overweight” from “equal-weight” by brokerage Morgan Stanley, which said mergers among major telephone companies may lessen price competition in the business.
