Stocks strode higher yesterday as investors grew hopeful that the interest-rate-tightening cycle might end soon, but a late-session rise...
NEW YORK — Stocks strode higher yesterday as investors grew hopeful that the interest-rate-tightening cycle might end soon, but a late-session rise in oil prices limited Wall Street’s gains. Bonds rallied, sending the yield on the 10-year Treasury note below 4 percent.
The Dow Jones industrial average rose 82.39 to 10,549.87, rising up to 123.51 before giving up some gains as oil prices surged more than $2.60 a barrel.
Microsoft, one of the 30 Dow stocks, added 1 cent to close at $25.81 a share. Boeing, also a Dow stock, slipped 10 cents to $63.80.
Broader stock indicators also moved sharply higher. The Standard & Poor’s 500 index was up 10.72 at 1,202.22. The Nasdaq composite index climbed 19.64 to 2,087.86.
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Bonds continued to build on Tuesday’s rally; the yield on the 10-year Treasury note dropped to 3.88 percent, from 3.98 percent late Tuesday. The euro slid to its lowest level against the dollar in eight months as voters in the Netherlands joined France in rejecting the European Union (EU) constitution, putting any economic reforms it might bring on hold. Gold prices rose.
But oil futures soared, climbing $2.63 to $54.60 a barrel on the New York Mercantile Exchange on concerns that strong demand for diesel will leave it and other distillate fuels, including heating oil, in short supply later this year. Government inventory data, due today, also was expected to influence trading.
Trading at the New York Stock Exchange was halted several minutes before the market closed because of communications problems.
Data from the Institute for Supply Management (ISM) indicated the manufacturing sector is continuing to expand, albeit at a slower pace, and a component within the index that measures prices paid by purchasing managers suggested inflation remains in check.
That, combined with an influx of capital amid questions about whether the proposed EU constitution would be approved, added up to good news for U.S. markets, said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors.
“The Fed has told us they will continue to raise rates at a measured pace, but each decision will be made on the basis of existing or current conditions. And current conditions tell me that it’s not a sure bet the Fed will raise rates at their June 30 meeting,” Johnson said.
Earlier in the day, investors had been encouraged by remarks from Federal Reserve Bank of Dallas President Richard Fisher, who suggested the current rate-tightening cycle is drawing to a close. Referring to the previous eight interest-rate increases, which brought the federal funds rate to 3 percent, Fisher told The Wall Street Journal, “We’ve gone through eight innings here, 25 basis points an inning.” Many analysts saw this as a sign the next increase could be the last.
The ISM’s manufacturing index came in at 51.4 for May, its lowest since June 2003, and below the 52 economists expected.
Wall Street was pleased, however, that it hadn’t dropped below 50, which would indicate a contraction; as long as the index remains above 50, it means the sector is expanding, as it has for the past 24 months.
In addition, the “prices-paid” component, which measures the percentage of purchasing managers that reports paying higher prices for raw materials, declined substantially, from 71 percent in April to 58 percent in May.