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Dow hits high as bond yields drop on Treasury plan

NEW YORK: US stocks and the dollar rose on Thursday, with the Dow Jones industrial average ending at a record high, as bond yields fell on news that the US Treasury plans to buy back up to $30 billion of government debt this year.

The market was also relieved at signs of steady economic growth with inflation in check.

In the commodities markets, oil surged to near a post-Gulf War high in New York after key oil ministers said global supply curbs may continue throughout this year. Corn and cotton prices also climbed as crop estimates were cut.

"The market had been overreacting to interest-rate concerns," said Arthur Hogan, chief market analyst at Jefferies & Co. "It is really not a big surprise that it has rallied back."

Based on early and unofficial data, the Dow Jones industrial average closed up 31.33 points, or 0.27 percent, at a record closing high of 11,582.43. It was led by gains in financial services firms such as J.P. Morgan & Co. Inc., up 3-3/16 to 122-13/16, and American Express Co., which gained 13/16 to 156.

Software giant Microsoft Corp., which had called a news conference for 4.30 p.m. US Eastern Standard Time but declined to disclose the subject, climbed 2 to 107-13/16.

The technology-laced Nasdaq Composite index ended with a gain of 107.19 points, or 2.78 percent, to 3,957.21.

Oil and pharmaceutical stocks were also strong while airlines, computer software companies and semiconductor equipment makers slid.

The broader Standard & Poor's 500 index ended up 17.43 points, or 1.22 percent, at 1,449.68.

Stoking the gains was the improving bond market.

The US Treasury 30-year bond rose 24/32, or $7.50 on each $1,000 of face value, lowering the yield, which moves in the opposite direction, to 6.65 percent. On Wednesday the yield was 6.72 percent, the highest since July 1997, as investors focused on fears the US Federal Reserve will enact a series of interest-rate hikes this year to keep inflation at bay.

Helping the bond market Thursday was news the US Treasury plans to buy back $30 billion in debt, which would pull some supply out of the fixed-income market.

News on the inflation front was mixed on Thursday, with prices at the wholesale level for December matching expectations, but retail prices for the same month showing Americans spent more than was anticipated.

"These numbers fit into the scenario that keeps the Fed at 25 basis points at its next meeting. Inflation at the wholesale level is in line," said Alan Ackerman, the senior vice president and market strategist for Fahnestock & Co.

The overall Producer Price Index in December rose 0.3 percent, exactly matching the forecast of economists polled by Reuters. The core PPI, which excludes volatile food and energy prices, rose 0.1 percent in December.

Total US retail sales leaped 1.2 percent in December, the biggest gain since August. The increase was linked to Christmas shopping and stockpiling of consumer goods, due to fears of disruption that might be caused by the Year 2000 computer bug.

In currency trading, the dollar rose to $1.0252 per euro and 106.04 Japanese yen late on Thursday, from $1.0310 per euro and 105.90 yen late on Wednesday.

On the New York Mercantile Exchange, crude oil for February delivery climbed as high as $27.12 a barrel -- just three cents shy of the post-Gulf War high of $27.15 set on Nov. 22. The price rise was a reaction to news that global oil-production curbs may continue throughout this year. The February crude contract eased a bit to close at $26.69 a barrel, up 41 cents.

In other commodities markets, corn and cotton futures prices rose after crop forecasts were cut.

At the Chicago Board of Trade, corn futures for March delivery soared 5-1/4 cents per bushel to $2.20-3/4, the contract's highest close since Sept. 29. On Wednesday, the US Department of Agriculture cut 100 million barrels off its final production estimate for the 1999 US corn crop.

At the New York Cotton Exchange, March cotton futures gained 1.03 cents to end at 54.75 cents a pound, the contract's highest settlement since Oct. 27. The USDA lowered its estimates for China's cotton crop and world cotton production for 1999/2000, in reports also issued Wednesday.

Overseas, London's FTSE 100 benchmark index ended down just 1.3 points, or 0.02 percent, at 6,531.5. In Tokyo, the benchmark Nikkei average of 225 leading shares closed up 155.87 points or 0.83 percent at 18,833.29. -Reuters