Stocks mostly post gains
Stocks ended mostly higher Tuesday and the rush into short-term U.S. Treasury securities appeared to slow, signaling that fears about the health of the financial system may be easing.
In a session that was tranquil relative to what investors have experienced in recent weeks, the Dow Jones industrial average slipped 30.49 points, or 0.2%, to 13,090.86, but most broader indexes were up marginally.
Sen. Christopher J. Dodd (D-Conn.) helped lift stocks early in the day after he gave an account of a morning meeting he had with Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry M. Paulson Jr.
Dodd said he asked Bernanke whether he was “willing to use all the tools available to him” to calm financial markets. The Fed chief’s reply was “absolutely,” Dodd said -- which some analysts took to mean that the central bank could cut its key short-term interest rate, the federal funds rate, in the next few weeks.
That expectation may have helped to stem recent panicked demand for super-safe short-term government securities.
Interest rates on three-month U.S. Treasury bills rebounded Tuesday after hitting two-year lows Monday. The annualized yield on the three-month T-bill ended at 3.59%, up from 2.92% on securities the Treasury sold Monday.
The yield on the six-month T-bill was little changed at 4.06%, compared with 4.09% on the new issue sold Monday.
The plunge in T-bill yields Monday had unnerved some Wall Street players because it followed the Fed’s surprise decision Friday to cut the interest rate at which it lends to commercial banks, the less significant of the two key rates the Fed controls.
The Fed made the move to try to soothe markets’ frayed nerves. Investors have been spooked by weeks of stock and bond market tumult fueled by a growing unwillingness on the part of lenders to extend credit -- a problem rooted in the housing sector’s woes.
Despite the Fed’s rate cut, investors Monday continued to snap up short-term Treasury securities instead of buying higher-yielding corporate IOUs, such as commercial paper.
But Tuesday the government’s auction of $32 billion in four-week T-bills attracted relatively poor demand. Some bond traders said that reflected investors’ reluctance to bid for the securities in the wake of the dive in short-term yields.
The Federal Reserve moved Tuesday to boost the supply of Treasury securities. The Fed’s New York branch said it cut the fee that it charges bond dealers to borrow government securities.
“They’re doing every little tweak that they have” to keep credit flowing in the financial system, said George Goncalves, chief Treasury strategist at Morgan Stanley in New York.
The appetite for short-term Treasury IOUs may continue to increase because nervous investors are plowing cash into money market mutual funds that buy only government securities, according to fund tracker IMoneyNet Inc. Those funds have taken in $60 billion in fresh cash in the last four business days, boosting total assets to $558 billion, IMoneyNet said.
Yields on longer-term bonds also may continue to slide if investors believe that the Fed will begin to cut the federal funds rate, now at 5.25%.
The yield on the 10-year T-note ended Tuesday at 4.59%, down from 4.63% on Monday and the lowest since late March.
The dollar was mixed against other major currencies, while gold futures were unchanged from Monday.
Oil prices dropped below $70 a barrel to an eight-week low, after Hurricane Dean weakened and it appeared that the storm would have no lasting effect on Mexican oil production. Crude futures fell $1.65 to $69.47 a barrel in New York. That pushed down shares of many energy firms, limiting the broad market’s gains.
The Standard & Poor’s 500 index inched up 1.57 points, or 0.1%, to 1,447.12. It’s up 2% year to date.
The Nasdaq composite index added 12.71 points, or 0.5%, to 2,521.30. It’s up 4.4% this year.
The Russell 2,000 index of smaller companies rose 0.93 point, or 0.1%, to 788.38.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange.
In other market highlights:
Countrywide Financial surged $1.98, or 10%, $21.79 on speculation that it was a takeover target. Other lenders rebounding sharply included Downey Financial, up $3.29, or 6.4%, to $54.90; FirstFed Financial, up $4.30, or 8.9%, to $52.45; and IndyMac Bancorp, up $1.76, or 8.5%, to $22.50.
Capital One Financial rose $1.75, or 2.6%, to $68.47. The credit card giant said late Monday that it was shutting its GreenPoint Mortgage unit, which specialized in “jumbo” loans, and slashing 1,900 jobs.
Target added $1.01 to $60.10 after the retailer reported that quarterly profit rose 13%.
Overseas, key stock indexes rose 1.1% in Japan, 1% in Shanghai, 0.6% in Hong Kong, 0.4% in France, 0.2% in Germany and 0.1% in Britain.
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