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Wall Street soars as bond market tensions ease

Wall Street soars as bond market tensions ease
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First Published: Fri, May 29 2009. 08 45 AM IST
Updated: Fri, May 29 2009. 08 45 AM IST
New York: Wall Street stocks rose strongly on Thursday, lifted by a late rally as tensions eased on the bond market following news of robust demand for Treasury bonds.
The Dow Jones Industrial Average of 30 blue-chip stocks rallied 103.78 points (1.25%) to finish at 8,403.80.
The tech-heavy Nasdaq gained 20.71 points (1.20%) to end at 1,751.79 and the broad-market Standard & Poor’s 500 index advanced 13.77 points (1.54%) to 906.83.
The major indices had churned in a narrow range as investors digested a mixed batch of US economic data and details of a bankruptcy plan for General Motors.
“The equities market reversed course at midday, fueled by climbing commodities prices and stronger-than-expected results from the latest Treasury bond auction,” said Andrea Kramer at Schaeffer’s Investment Research.
“By the closing bell, all the stars seemingly aligned for the Dow, which ended the session with a triple-digit gain,” she added.
Bonds rebounded from Wednesday’s sell-off. The yield on the 10-year US Treasury bond fell to 3.672% from 3.695% on Wednesday and that on the 30-year bond eased to 4.530% from 4.606%. Bond yields and prices move in opposite directions.
Charles Schwab & Co. analysts also noted traders’ relief that a Treasury auction of seven-year bonds trimmed yields that had hit months-long highs on Wednesday on worries about the swelling US government debt that also drove stocks into a rout.
“A good auction in the bond market pressured yields, which have moved to uneasily high levels, providing some relative relief to fears that increasing yields may hamper a recovery in the equity markets, and stocks finished solidly higher,” they wrote in a client note.
Energy shares led gains after the US government reported a surprisingly large decline in US crude oil inventories, sparking hopes of a recovery in demand that sent oil prices sharply higher.
“Big oil has been good for the US economy. Big oil does well when the economy is doing well and the increase that we have seen in oil prices is a sign that the economy is recovering,” said Phil Flynn of Alaron Trading.
Oil majors lifted after crude oil prices topped $65 a barrel for the first time in more than six months.
ExxonMobil, the Dow’s biggest component, gained 1.36% to $69.23 and Chevron leapt 1.92% to $65.81.
Among other stocks in focus, reeling General Motors slid 2.61% to $1.12. The largest US automaker was finalizing a pre-packaged bankruptcy that would leave the US government with up to 72.5% of the new firm.
Procter & Gamble dropped 1.56% to $52.59 after the consumer products manufacturer and Dow component issued disappointing guidance.
Caterpillar, another Dow component, slid 1.31% to $34.59 after a downgrade by UBS analysts.
Time Warner added 2.39% to $23.55. The media group announced it would spin off its AOL Internet unit by year-end.
Telcom giant AT&T advanced 2.33% to $24.63 after chief executive Randall Stephenson said the company intended to keep its fixed-line business, unlike rival Verizon, whose shares dropped 1.11% to $29.27.
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First Published: Fri, May 29 2009. 08 45 AM IST
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