Bond Rates Soar; Dow Hits Another High

Long-term bond interest rates soared firmly above 6% on Monday as strong economic data dashed hopes for a U.S. rate cut, but blue-chip stocks closed at an all-time high for the fourth session in a row.

The Dow Jones industrial average ended 4.73 points higher at 8,550.45, surpassing Friday’s record finish of 8,545.72.

The Nasdaq composite index was yanked lower by an afternoon reversal in the technology group, which led the market’s return to record territory last month. The Nasdaq index was off 11.97 points at 1,758.54.

Overall, however, stocks withstood the drag of the bond market, where long-term interest rates pushed above 6% after a widely watched report raised uncertainty about the steady-growth, tame-inflation scenario so instrumental in restoring investor confidence.

In the first broad reading on the just-ended month, an association of factory executives reported that growth in the nation’s manufacturing sector accelerated in February. Economists had predicted no change in the monthly report by the National Assn. of Purchasing Management, which also said prices paid for factory supplies continued to fall in February, albeit at a slower pace.

The bond market slid following the report, which undermined arguments that the economic crisis in Asia will slow the U.S. economy and inflation enough to allow the Federal Reserve Board to cut interest rates soon. Inflation fears make bonds and other fixed-income investments less attractive.

As bond prices fell, the yield on the 30-year Treasury--a key influence on borrowing costs--rose to close a shade above 6%, the highest level this year and up from Friday’s 5.92%. The yield had dropped below that level back in December, spurring hopes that increased borrowing and spending here would offset the economic drag from Asia.

“Long bond yields going above 6% is not good news for stocks,” said Rao Chalasani, chief investment strategist at Everen Securities in Chicago. “With consumer confidence at a 30-year high, it doesn’t bode well for the economy to slow down.”

But on the flip side, the healthy showing by the manufacturing sector did bolster hopes that first-quarter profits may not suffer so serious a dent from Asia.

“It’s the overall strength of the U.S. economy that is central to profit growth expectations” and stock prices based on those expectations, said Joe Battipaglia, chief investment strategist at Gruntal & Co.

In the broader market, advancing issues outnumbered decliners by a 4-to-3 margin on the New York Stock Exchange, where volume totaled 592.73 million shares, up from Friday’s brisk pace.

The Standard & Poor’s 500-stock index fell 1.64 points to 1,047.70, snapping a three-session streak of record highs, but the NYSE composite index rose 0.37 point to 544.63 for its fourth closing record in a row.

The Russell 2,000 index of smaller companies fell 0.29 point to 461.54.

* Bellwether tech issues on Nasdaq gave back a chunk of their recent gains. Dell Computer, which surged 40% last month, fell $4.25 to $135.63, followed by Intel, down $2.06 to $87.63, and Microsoft, down $1.38 to $83.38.

Teradyne tumbled $6.19 to $41 amid concern that orders for its semiconductor testing equipment will be lower than expected. Applied Materials fell $1.38 to $35.44, Novellus Systems dropped $3 to $44.94 and KLA-Tencor slid $3.16 to $43.

Amazon.com fell 75 cents to $76.25 after a big run-up Friday.

* Among Dow stocks, IBM fell $2.50 to $101.94 and Hewlett-Packard fell $1.75 to $62.25 as two of the index’s weakest components, along with Disney, down $2.56 to $109.38; Alcoa, down $2.50 to $70.88; and Procter & Gamble, down $2.38 to $82.50. Helping offset those losses were J.P. Morgan, up $4.06 to $123.56, and 3M, up $3.69 to $89.

* Del Webb dropped 69 cents to $31.31 after the developer of retirement communities in Sun City, Ariz., said talks on selling the company had ended.

Overseas, Tokyo’s Nikkei stock average rose 2.6%, Frankfurt’s DAX index rose 0.6% and London’s FTSE-100 rose 0.9% to a new high.