Major stock indexes having high times
The economic news keeps getting better for stock investors -- but not for owners of Treasury bonds.
Upbeat reports on the economy sent major stock indexes to new all-time highs Friday, leaving the Dow Jones industrial average up nearly 10% year to date.
To Treasury bond investors, however, a better economy means a diminishing chance of interest rate cuts by the Federal Reserve. That is causing long-term interest rates to rise, devaluing older bonds.
On Wall Street, stocks were broadly higher after the government said the economy created a net 157,000 jobs in May, more than expected. A separate report on U.S. factory activity showed a pickup last month.
The Dow Jones industrial average gained 40.47 points, or 0.3%, to a record 13,668.11. The Dow, which has risen in eight of the last nine weeks, is up 9.7% year to date.
The Standard & Poor’s 500 index, which Wednesday finally surpassed its previous peak reached in 2000, added 5.72 points, or 0.4%, to a record 1,536.34. It is up 8.3% this year.
Records also were set Friday by the Dow Jones Wilshire 5,000 index, the New York Stock Exchange composite and the Russell 2,000 small-stock index, among others.
The Nasdaq composite index rose 9.40 points, or 0.4%, to 2,613.92, a six-year high.
“We’ve had a well-balanced economic picture, very low inflation and good earnings,” said Lincoln Anderson, who helps manage $150 billion as chief investment officer of LPL Financial Services in Boston. “The combination is great for stocks.”
The healthy increase in new jobs last month points to a continuing economic expansion, which should support corporate earnings growth, analysts say.
That also was the message in the Institute for Supply Management’s index of national factory activity for May. The index inched up to 55.0 from 54.7 in April, and was the highest in 13 months.
The ongoing wave of merger deals also is bolstering stock prices. Shares of Dow Jones surged $7.89 to $61.20 after the Bancroft family, which controls the company, agreed to talk to News Corp. about its $60-a-share offer for the business. News Corp. rose 59 cents to $24.22.
But Treasury bond investors just keep seeing red in the economic trends.
“The message that the bond market took away from these data was that risk of a slowdown or recession is minimal and that growth will be maintained in the quarters ahead at a pace that will prevent the Fed from lowering interest rates,” said Michael Moran, chief economist at Daiwa Securities America.
The benchmark 10-year T-note yield rose to 4.95%, up from 4.89% on Thursday and the highest since August.
Higher yields on new bonds push down prices of older bonds that pay lower fixed rates. The share price of the Vanguard Long-Term Treasury bond mutual fund fell to $10.78 on Friday from $10.84 on Thursday. The price was $11.30 in early March.
Rising Treasury yields also are pushing mortgage rates up, which is bad news for struggling home builders. Ryland Group fell $1.40 to $44.80. Hovnanian Enterprises slid $1.15 to $24.11.
But most stocks were higher Friday. Winners topped losers by more than 2 to 1 on the NYSE.
For the week, the Dow rose 1.2%, the S&P; 500 gained 1.4% and the Nasdaq rallied 2.2%.
Higher bond yields may at some point begin to worry Wall Street, but they aren’t yet.
Among the day’s market highlights:
* Industrial stocks rising on optimism about the economy included Parker-Hannifin, up $1.23 to $102.59; U.S. Steel, up $3.64 to $116.80; and DuPont, up 78 cents to $53.10.
* Energy stocks jumped to new highs as crude oil futures in New York gained $1.07 to $65.08 a barrel, although the price was down slightly for the week. Exxon Mobil rose $1.05 to $84.22 and ConocoPhillips surged $1.43 to $78.86.
* Wal-Mart Stores helped lift the Dow, gaining $1.87 to $49.47 after the company said it would slow expansion plans in an effort to boost sales at existing stores.
Retail stocks in general had a good day. J.C. Penney rose $1.51 to $81.99 and J. Crew soared $5.21 to $50.08 on a strong first-quarter earnings report.
* Among new stock issues, Jazz Pharmaceuticals got a poor reception on its first day of trading. The stock slid 27 cents to $17.73. The drug company on Thursday sold 6 million shares at $18 each.
