Higher bond yields hold back enthusiasm for stocks

Stocks finished mixed Thursday in uneven post-holiday trading as a rebound in bond yields stifled Wall Street’s excitement about new buyout activity and strength in the service economy.

The Institute for Supply Management’s index of service sector activity rose to 60.7 in June from 59.7 in May, indicating slightly faster growth for the sector. The figure was better than expected, backing the view that the economy was recovering from a slow first quarter.

The upbeat report lifted bond yields that had already risen after payroll company Automatic Data Processing said the private sector added 150,000 jobs last month -- a good sign that the Labor Department’s report on June nonfarm payrolls Friday will show a solid rise.

The 10-year Treasury note’s yield shot up to 5.14% from 5.04% late Tuesday, ahead of the Fourth of July holiday. On Monday, the 10-year yield had slipped below the 5% level for the first time since early June.

Robust economic data can be double-edged for stocks; though investors want the economy to strengthen, they remain worried that it will lead the Federal Reserve to raise interest rates, which can slow down business.

But the 10-year Treasury yield would have to rise significantly to do any real damage to the stock market, said Joe Balestrino, a portfolio manager at Federated Investors Inc. “If things are good, yields are supposed to be a little higher.”

The Dow Jones industrial average fell 11.46 points, or 0.1%, to 13,565.84. The Standard & Poor’s 500 index edged up 0.53 of a point to 1,525.40.

The Nasdaq composite index rose 11.70 points, or 0.4%, to 2,656.65. The Nasdaq 100 index of major tech stocks jumped 0.8% to 1,981.06, its highest close since 2001. It is up 13% this year.

The Russell 2,000 index of smaller-company stocks rose 1.93 points, or 0.2%, to 850.13.

Declining issues outnumbered advancers by about 4 to 3 on the New York Stock Exchange, where consolidated volume came to a relatively light 2.62 billion shares, up from 1.52 billion shares in Tuesday’s abbreviated session.

U.S. stock and bond markets were closed Wednesday because of the Fourth of July holiday.

The Nasdaq indexes were lifted by Apple, Google and Research in Motion, all of which closed at record highs. Apple gained $5.71, or 4.5%, to $132.88 on unrelenting enthusiasm over the iPhone. Google rose $7.29, or 1.4%, to $541.63 BlackBerry maker Research in Motion climbed $8.34, or 4%, to $216.28 after saying it won clearance to sell its so-called smart phones in China.

The Dow’s performance Thursday was curbed by General Motors, which fell $1.22, or 3.2%, to $36.76 after Bear Stearns downgraded the stock. The automaker Tuesday posted a 21% drop in June sales compared with last year.

Takeover activity continued to encourage some stock investors. Hilton Hotels announced late Tuesday that it had agreed to be acquired by Blackstone Group for $20.1 billion plus assumption of debt. Chemical company Huntsman said Wednesday that a private equity firm made a cash buyout offer of about $6 billion that trumped a bid last week by a Dutch company, and a Coca-Cola spokesman said Wednesday that the company was considering buying Cadbury Schweppes’ Snapple iced tea brand.

Hilton soared $9.34, or 26%, to $45.39 and Huntsman jumped $3.06, or 13%, to $27.46. Coca-Cola slipped 23 cents to $52.67.

The Hilton deal pushed up other hotel stocks as well. Marriott International, the biggest U.S. hotel operator, jumped $3.11, or 7%, to $47.57. Starwood Hotels & Resorts Worldwide rose $5.42, or 7.8%, to $74.55. Host Hotels & Resorts added $2.17, or 9.1%, to $26.01.

The dollar rose against most major currencies on the strong U.S. economic data, and gold prices fell.

Oil prices ended higher after an early decline as unrest in Nigeria, a major U.S. oil supplier, offset a report from the Energy Department indicating that oil and gasoline inventories increased last week. Crude futures climbed 40 cents to $71.81 a barrel on the New York Mercantile Exchange.

* An index of real estate investment trusts jumped 1.5% after the Wall Street Journal reported in a front-page article that rents were rising sharply.

* In after-hours trading, Parametric Technology plunged $4.71, or 22%, to $21.57 after the software maker warned of lower-than-expected revenue.

* Chinese stocks tumbled on worries about government steps to cool the market and a high number of expected new stock listings. Shanghai’s main index sank 5.2%.

* Elsewhere overseas, key stock indexes rose 0.3% in Japan and fell 0.6% in Britain, 1.1% in Germany and 0.6% in France.