As Bonds Fall Again, Stocks Gain Ground

Stocks rose modestly yesterday as investors dismissed more poor economic news and crude oil prices briefly climbed back to $50 a barrel.

The Dow Jones industrial average closed up 0.7 percent, or 62.21 points, at 9015.10, and the Standard & Poor's 500-stock index was up 0.8 percent, or 7.25 points, to 934.70. The Nasdaq composite index outpaced the other indexes, rising 1.5 percent, or 24.35 points, to 1652.38.

Quiet trading in the stock market has helped ease demand for government bonds, a traditional safe haven from stocks' turbulence. Prices for 10-year bonds fell for the third consecutive trading day, driving the yield up to about 2.5 percent yesterday, its highest level since mid-December.

Though demand for government bonds has eased a bit, it still remains at historic levels as investors have sought safe havens in a faltering economy. If economic stimulus efforts are successful, demand could fall further, said Win Thin, senior currency strategist for Brown Brothers Harriman. "However, given recent weak data around the globe, that day appears to be a ways off still," he said.

Investors faced a new string of poor economic reports yesterday. In its minutes released from last month's meeting, the Federal Reserve predicted that the economy will suffer further this year and unemployment could rise through 2010.

Factory orders fell 4.6 percent in November, according to Commerce Department data, twice as much as analysts had expected. And the pending home sales index fell to 82.3 in November from 85.7 in October, the lowest reading since the series began in 2001, according to the National Association of Realtors.

There was one bright spot: The service sector did not suffer as much as expected in December, according to Institute for Supply Management data. The non-manufacturing index reached 40.6 in December, up from 37.3 in November. That means that while the service sector contracted for the third consecutive month, it was at a slower rate, according to the report.

After being pulled down by fears that a global recession would curtail demand, crude oil prices jumped above $50 a barrel yesterday before losing some ground. Oil settled virtually flat, at $48.58 a barrel.

Prices are still far from their peak of $147 a barrel last summer but could reach $70 this year, said Thomas Hartmann, an Altavest Worldwide Trading broker. "The long-term forecasts depend on the economic outlook and recovery, if there is one," he said.