Stocks Mixed Despite Further Climb in Yields

Wall Street failed to see a big problem in rising interest rates Tuesday, as stocks finished mixed but mostly higher despite a bond-market sell-off.

Recovering from a modest decline early in the day, the Dow Jones industrials notched a fifth straight record, rising 34.38 points to 8,584.83, even as long-term bond yields jumped on yet another strong U.S. economic report.

The broad market also was surprisingly strong: Winners topped losers by 16 to 14 on the New York Stock Exchange. Losers had the edge on Nasdaq, but only by about 22 to 20.

The Standard & Poor’s 500 index wiped out Monday’s small loss to set its fourth record in five sessions, while the Nasdaq composite was off just 1.40 points to 1,757.14.

Some analysts were surprised by the market’s resilience, as the 30-year Treasury bond yield jumped from 6% on Monday to 6.07% on Tuesday, highest since Dec. 10, on the heels of a bullish report on new-home sales in January.

Bond traders “are throwing in the towel” on the idea that the economy will slow meaningfully because of Asia’s crisis, said Richard Gilhooly, a government bond strategist at Paribas Corp.

Shorter-term yields, however, were up only marginally on Tuesday, analysts noted.

Still, most yields have risen sharply since mid-January, as bond investors who had expected the Federal Reserve Board to ease credit this spring now are growing worried that the Fed could instead tighten credit, if economic growth continues at a fast pace.

A key report for bonds comes on Friday, when the government reports on February employment trends.

The bond market also has been hurt by the surge in bond-issuance by the corporate sector this year, as many companies rushed to borrow as yields fell to 20-year lows in January. Companies have sold more than $100 billion of debt year-to-date, swamping the market.

For stocks, meanwhile, the idea of better-than-expected economic growth is helping sentiment rather than hurting it, because a healthier economy could ensure strong corporate earnings growth.

“It’s the demand side of the equation--the earnings side, the revenues side--that investors were looking at here,” said A.C. Moore, investment strategist for Principal Financial Securities of Dallas.

But analysts warned that rising yields are likely to halt stocks’ rally sooner than later.

Among Tuesday’s highlights:

* Airline stocks rose amid continuing low oil prices, a $100-million stock buyback announcement from Continental Airlines, and an upbeat report on US Airways from Merrill Lynch.

US Airways jumped $4.56 to $68.06, Continental class B shares rose $1.56 to $52.06, Delta gained $3.19 to $116.38 and AMR, parent of American, rose $4.56 to $132.56.

* Among stocks being helped by the stronger-than-expected economy, builder Kaufman & Broad jumped $1.88 to $28.75, retailer Wal-Mart rose $1.56 to $48.44 and truck-maker Paccar gained $1.09 to $65.13.

* Bank stocks rallied despite higher bond yields. Wells Fargo shot up $7.38 to $329, BankBoston rose $1.38 to $100.69 and Chase Manhattan was up $1.56 to $125.31.

* In the tech sector, Compaq and Dell Computer both fell amid concern that personal computer price competition was extremely aggressive in January. Compaq lost $1.31 to $29.81 and Dell dropped $4.50 to $131.13.

Chip giant Intel also weakened for a second consecutive day, losing $2.31 to $85.31.

* Amazon.com tumbled $4.50 to $71.75, amid speculation that the online bookseller may generate scant profit despite rapid growth, as large retailers also begin selling books on the Internet.

Market Roundup, D9