Most Stocks See Gains; Treasury Yields Decline

Stocks ended mostly higher on Wednesday, although key indexes were little changed after Tuesday’s strong rally.

Treasury bond yields sank as some investors sought relative safety in the wake of the government’s latest warning about possible terrorist strikes. Oil prices declined.

On Wall Street, most shares traded in narrow ranges the entire session. The Dow Jones industrial average ended with a loss of 7.73 points, or 0.1%, at 10,109.89, after surging 159 points on Tuesday -- the biggest rally in two months.

But most other major indexes rose. The Standard & Poor’s 500 index completed its first five-day string of gains in eight months, adding 1.89 points, or 0.2%, to 1,114.94.

The Nasdaq composite index rose 11.50 points, or 0.6%, to 1,976.15, after jumping 2.6% on Tuesday.

Rising stocks outnumbered losers by about 5 to 3 on the New York Stock Exchange and by 3 to 2 on Nasdaq.

The market’s terrorism fears were reawakened as the government warned that it had reason to believe that Al Qaeda was determined to attack the U.S. this summer.

That helped to bolster prices in the Treasury bond market, sending yields lower. The 10-year T-note yield dipped to a three-week low of 4.66% from 4.72% on Tuesday. The yield on the five-year T-note slid to 3.79% from 3.88% on Tuesday.

The government sold $25 billion of new two-year T-notes at a yield of 2.54%.

Economic reports showing a drop in new-home sales in April and a decline in durable-goods orders also may have helped the bond market by calming worries about how soon the Federal Reserve might tighten credit, analysts said.

“There are signs that maybe the economy isn’t as strong as everybody believed a week ago,” Raymond Remy, head of fixed income at Daiwa Securities America in New York, told Bloomberg News.

In the stock market, however, many investors are counting on a strong economy to lift corporate earnings. Some analysts said Tuesday’s rally was spurred by growing faith that the economy’s pace will be robust into 2005.

In commodities trading Wednesday, oil prices fell for a second straight day. Near-term crude futures in New York eased 44 cents to $40.70 a barrel. Prices hit a record high of $41.72 on Monday.

U.S. gasoline inventories fell 700,000 barrels to 203 million barrels in the week ended Friday, the government said. During the same week last year, supplies plunged 3.4 million barrels.

Some analysts said the slower drawdown could take pressure off gasoline and oil prices in the near term.

Although the latest terrorist warnings had little immediate effect on stock prices, that could soon change, said Michael Sheldon, chief market strategist at Spencer Clarke.

“We’ve seen terror concerns, along with the situation in Iraq, weigh pretty heavily on the markets,” Sheldon said. “I don’t think this latest alert is priced in yet, and depending on how serious it is, it could cause a drop over the next few days, or at least keep stocks in this range.”

Among Wednesday’s highlights:

* Financial services firm Washington Mutual rose $1.67 to $44.25, continuing its recent gains on rumors that it might be a takeover target for a large foreign bank.

* Some California banking stocks also attracted buyers, including UnionBanCal, up $1.01 to $57.26; East West Bancorp, up $1.74 to $59.67; and City National, up $1.17 to $64.21.

Wells Fargo rose 37 cents to $59.12 after announcing that it would buy key assets of mutual fund company Strong Financial.

* Medical device maker Guidant plunged $6.78, or 11.2%, to $53.71. The firm said it found “issues” in its Champion drug-coated heart stent that might require design changes and delay its filing for Food and Drug Administration approval until December.

Boston Scientific, a Guidant rival, soared $4.46, or 11%, to $44.82. Guidant’s announcement came a day after Boston Scientific said its Taxus stent was effective in high-risk patients.

* Two Southland-based retail shares hit 52-week highs. Guitar Center jumped $2.20 to $43.11; Smart & Final gained 62 cents to $15.50.

* Furniture maker La-Z-Boy fell $1 to $18.19 after swinging to a loss in the first quarter after writing down impaired assets.

* Fidelity National Financial jumped $2.68 to $38 after saying it planned to spin off its non- insurance operations as a separate company, via an initial public stock offering.

* The gold market was flat despite the new terrorism warning. Near-term gold futures in New York were unchanged at $388.30 an ounce.