Stocks surge higher as bond yields plunge
NEW YORK » A plunge in Treasury bond yields propelled stocks sharply higher yesterday as investors grew optimistic that the Federal Reserve's streak of interest rate hikes will soon end. Record revenues and a jump in profits at Goldman Sachs Group Inc. also boosted the market and sent the Dow Jones industrials and Standard & Poor's 500 index to nearly five-year highs.
Investors who watched bond yields reach nearly two-year highs last week were cheered as the yield on the 10-year Treasury note fell to 4.69 percent from 4.77 percent late Monday. The credit markets reacted to signs of a moderating economy, particularly a Commerce Department report that February retail sales had the largest decline in six months.
The report raised hopes that the Federal Reserve will end its string of interest rate hikes in the near future.
Wall Street was pleased with another Commerce Department report, that U.S. business inventories rose 0.4 percent in January after a 0.8 percent advance in December. Sales also grew 8.5 percent at an annual rate. Because the pick-up in sales outstripped the growth in inventories, investors took this as a sign that more inventory investment could be coming.
Goldman's report of a 62 percent jump in first-quarter profits also lifted the market. The investment firm's own stock rose 6.2 percent.
The company's "explosive" earnings "bode well for the sector in general, and it's a sector that all investors are watching," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati.
The Dow rose 75.32, or 0.68 percent, to 11,151.34. That was the highest close for the Dow since it stood at 11,175.84 on June 5, 2001.
Broader stock indicators rose. The Standard & Poor's 500 index rose 13.35, or 1.04 percent, to 1,297.48, achieving its highest close since May 22, 2001, when it reached 1,309.38. The Nasdaq rose 28.87, or 1.27 percent, to 2,295.90.
The dollar was mixed against other major currencies. Gold prices were higher. Crude oil futures rose. A barrel of light crude settled at $63, up $1.23, in trading on the New York Mercantile Exchange.
Analysts, noting Wall Street's erratic performance in recent weeks, said the market was ready for an advance.
In another economic report, the Commerce Department said the U.S. current account deficit, the broadest measure of the country's international trade, surged to a record $804.9 billion in 2005 as the United States went deeper into debt to foreigners.
The deficit was worrisome; it was a record not only in dollar terms but also as a percentage of the total economy at 6.4 percent of output, up from 5.7 percent in 2004.