Interest rates GE, dampen spirits
Stocks inched higher in light trading Thursday after government data indicated that the economy was growing at a slower pace, raising investors’ hopes that moderating economic growth might halt the Federal Reserve’s streak of interest rate hikes. The major indexes ended the week narrowly mixed.
Thursday’s gains were capped as General Electric Co., Advanced Micro Devices Inc. and Alcoa Inc. fell and bonds declined sharply, sending the yield on the 10-year Treasury bill above 5 percent for the first time since 2002.
The 5 percent yield could have acted as a “psychological barrier,” said Mike Malone, trading analyst, Cowen & Co. The fact that it didn’t “suggests yields could move higher in the next week, keeping some pressure on equities.”
The Dow Jones industrial average rose 7.68, or 0.07 percent, to 11,137.65.
Broader stock indicators were slightly higher. The Standard & Poor’s 500 index rose 1.00, or 0.08 percent, to 1,289.12 and the Nasdaq composite index rose 11.43, or 0.49 percent, to 2,326.11.
Declining issues led advancers by roughly 8 to 7 on the New York Stock Exchange.
The yield on the 10-year Treasury note rose to 5.05 percent from 4.98 percent late Wednesday.
Crude oil futures rose. A barrel of light crude settled at $69.32, up 70 cents, in trading on the New York Mercantile Exchange. The U.S. dollar fell lower against other major currencies. Gold prices fell.
The fuzzy outlook on interest rates didn’t get any clearer following a speech by U.S. Federal Reserve Governor Donald Kohn, who said he’s unsure how much tightening will be needed to keep inflation low, especially because labor markets are tight.
The Fed has raised official interest rates 15 straight times since mid-2004. The current rate is 4.75 percent and the Fed is widely expected to raise rates to 5 percent next month.
While the approaching holiday weekend kept many investors away — most financial markets around the world were closing for Good Friday — many traders were also making few moves in advance of next week’s cascade of earnings and economic reports. Earnings season will begin in earnest, the Labor Department will be issuing wholesale and consumer inflation data, and the Fed will release the minutes from its last policy-making meeting.
GE slid 57 cents to $33.89 after its first-quarter profit rose 9 percent, meeting analysts’ estimates. Investors were also looking for a bolder outlook from the company, which reaffirmed that it expects earnings of $1.94 to $2.02 for the year. The consensus analyst estimate by Thomson Financial is earnings of $1.99 a share.
The Russell 2000 index of smaller companies rose 3.34, or 0.45 percent, to 751.11.
Overseas, Japan’s Nikkei stock average rose 0.21 percent. Britain’s FTSE 100 added 0.48 percent, Germany’s DAX index rose 0.29 percent, and France’s CAC-40 gained 0.34 percent.