Wall Street finishes flat amid high bond yields
NEW YORK » Stocks finished a wobbly session flat yesterday as stubbornly high bond yields discouraged investors from extending Wall Street's recovery from last week's steep losses.
The yield on the Treasury's 10-year note rose to 5.16 percent yesterday from 5.11 percent late Friday. Last week, investors took signs of recalcitrant inflation to mean a rate cut by the Federal Reserve was unlikely, and they sent stock and bond prices tumbling; since yields move in the opposite direction from bond prices, market interest rates soared.
The 10-year Treasury yield climbed above 5 percent for the first time since last summer.
The Fed has kept the federal funds rate, the interest banks charge each other for overnight loans, unchanged at 5.25 percent since last summer, following a string of increases over about two years.
"I don't think that there is a lot of clarity as to monetary policy for the rest of 2007 and I think that in general puts markets on edge," said Les Satlow, portfolio manager at Cabot Money Management. "I think it's a reflection of institutional ambivalence," he said of the back-and-forth direction of stocks.
The Dow Jones industrial average rose 0.57, or less than 0.01 percent, to end at 13,424.96, capping a day of trading that saw stocks slip, advance, and then pull back again.
Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index rose 1.45, or 0.10 percent, to 1,509.12, and the Nasdaq composite index fell 1.39, or 0.05 percent, to 2,572.15.
Oil prices, which also stirred inflation concerns last week, rebounded yesterday after falling sharply Friday.
The Russell 2000 index of smaller companies fell 2.13, or 0.25 percent, to 833.18.
The dollar was higher against most other major currencies, and gold prices also rose.
Advancing issues just barely outnumbered decliners on the New York Stock Exchange, where consolidated volume came to 2.47 billion shares, down from 2.98 billion shares Friday.
Iran's oil minister said Monday the Organization of Petroleum Exporting Countries doesn't plan to release more oil into the market ahead of its next policy meeting in September. Light, sweet crude rose $1.21 to $65.97 per barrel on the New York Mercantile Exchange.
Cleveland Fed President Sandra Pianalto, speaking in Germany yesterday, said U.S. inflation remains higher than the Fed would like and that spikes in prices, liquidity crises or fiscal imbalances could upend central banks' notions of how contained inflation might be.
In corporate news, steel maker Nucor Corp. warned its second-quarter profit will fall because customers had increased orders in the first quarter ahead of an expected price rise, making for lower orders in the second quarter. Nucor fell $3.95, or 5.9 percent, to $62.66. Other steel makers fell as German steel company ThyssenKrupp AG denied it is in talks to acquire rival U.S. Steel Corp., which fell $8.85, or 7 percent, to $116.20.
Homebuilder stocks fell at the prospect that rising interest rates would drive up the cost of buying a home. Hovnanian Enterprises Inc. fell 56 cents, or 2.6 percent, to $21.24 and set a fresh 52-week low of $20.95; previously the low was $21.02. Toll Brothers Inc. fell 52 cents to $27.62.