3-Day Slide Ends as Bond Yields Fall

Stocks closed higher yesterday after a three-day slide as bond yields retreated and oil prices fell, easing worries about rising borrowing costs and inflation.
A flurry of encouraging corporate reports, including a strong monthly sales report from McDonald’s, lent support.
Shares in National Semiconductor, the computer chip maker, rose 14.7 percent after the company reported higher-than-expected profit, adding to optimism about technology spending and helping lift the Nasdaq more than 1 percent.
Even with yesterday’s gains, stocks finished the week with their heaviest losses since the week ended March 2 as bond yields rose on concerns that global growth will raise inflation. Rising yields can cut into corporate profits and make takeovers more expensive as borrowing costs rise.
Stocks also got a lift from falling crude oil prices after a storm that threatened Mideast supplies dissipated.
“After having been spooked by the rapidity with which long rates were rising, the market is regaining its footing, which makes some sense, seeing as the fundamentals haven’t changed at all,” said Michael T. Darda, chief economist at MKM Partners in Greenwich, Conn.
“What we essentially had was a bond market that was absurdly valued, priced for several rate cuts, and we found out that those assumptions were as wrong as wrong could be. I see weakness in stocks as a buying opportunity.”
The Dow Jones industrial average rose 157.66 points, or 1.19 percent, to 13,424.39. The Standard & Poor’s 500-stock index jumped 16.95 points, or 1.14 percent, to 1,507.67. The Nasdaq composite index climbed 32.16 points, or 1.27 percent, to 2,573.54.
For the week, the Dow declined 1.78 percent, the S.& P. 500 fell 1.87 percent and the Nasdaq lost 1.54 percent.
The benchmark 10-year Treasury note rose 6/32, to a price of 95 10/32. The note’s yield, which moves in the opposite direction from the price, retreated to 5.11 percent from 5.13 percent late Thursday.
Utility stocks, battered in the sell-off, climbed as the 10-year note’s yield declined. Utilities and other large-dividend payers had become less attractive to investors as bond yields rose during the week.
Shares of Constellation Energy gained $1.01, or 1.2 percent, to $83.92. Entergy rose $2.49, or 2.4 percent, to $106.80.
Shares of industrial conglomerates, particularly those sensitive to increases in oil prices, rose as crude oil futures fell more than $2 a barrel. Alcoa advanced 73 cents, or 1.9 percent, to $39.66, and helped lift the Dow. United Technologies rose $1.36, or 2 percent, to $70.23, while Boeing gained $1.35, or 1.4 percent, to $98.19. Together, they ranked as the Dow’s biggest gainers.
McDonald’s stock climbed $1.20, or 2.4 percent, to $51.41, posting its largest monthly comparable sales increase in more than three years.
Tyco International was up $1.17, or 3.6 percent to $33.80, after it formally approved its separation into three publicly traded companies through a spinoff to shareholders.
Semiconductor shares helped the Nasdaq composite index, with National Semiconductor shares up $3.79, to $29.58. The Philadelphia Stock Exchange index of semiconductors rose 3.1 percent.
Shares of Qualcomm gained 85 cents, or 2.1 percent, to $41.87, after the company said demand for wireless chips is better than expected.
A Russian Energy Exchange
The New York Mercantile Exchange is in talks to create a Russian energy exchange in St. Petersburg, according to its chief executive, James E. Newsome.
“We’re working with the Russian government to develop a futures exchange in St. Petersburg,” Mr. Newsome said yesterday while in St. Petersburg to sign a memorandum of understanding and begin the project.
Russia’s deputy economic development and trade minister, Kirill Androsov, said this week that he expected futures trading in the Russian export blend of crude oil, known as Rebco, to move to St. Petersburg by the end of 2007.