Newspaper article THE JOURNAL RECORD

Rising Commodities Prices Spur Drop in Stocks, Bonds

Newspaper article THE JOURNAL RECORD

Rising Commodities Prices Spur Drop in Stocks, Bonds

Article excerpt

NEW YORK (Bloomberg) -- U.S. stocks fell Tuesday with bonds, led by financial firms including Wells Fargo, as rising commodities prices sparked concern that the Federal Reserve may raise interest rates again to control inflation.

"The little thing annoying people is that the bond market has given back half its gains from Friday," said Jon Olesky, head of block trading at Morgan Stanley Dean Witter. "And the market rally on Friday was because of a friendly economic number which caused bonds to rally and stocks to follow."

The Dow Jones Industrial Average lost 44.32, or 0.4 percent, to 11,034.13, with J.P. Morgan contributing most to the loss. The Standard & Poor's 500 Index fell 6.79, or 0.5 percent, to 1,350.45, led by regional banks. The Nasdaq Composite Index dropped 3.28, or 0.1 percent, to 2,839.83. Five stocks fell for every four that gained on the New York Stock Exchange.

Wells Fargo fell 1 5/16 to 40 1/8, J.P. Morgan lost 4 3/4 to 129 1/16 and U.S. Bancorp dropped 1 5/16 to 30 1/2. Financial stocks tend to decline when bonds fall because the value of their fixed-income holdings drops. The yield on the 30-year bond rose 5.4 basis points to 6.08 percent.

Oil rose to a 23-month high, adding to concern that the Fed may raise rates for a third time this year. The Bridge-Commodity Research Bureau index, which tracks 17 raw materials, reached 202.55 -- its highest level since November. A slew of corporate bond issues that will yield more than Treasuries also helped drive government bond prices lower.

The Nasdaq had its biggest one-day point gain ever on Friday and the Dow industrials rose 2.2 percent after a smaller-than-expected increase in the number of new jobs suggested the Fed may have room to hold off raising rates.

Fed Chairman Alan Greenspan will speak today at Grand Valley State University, Michigan, to commemorate the 25th anniversary of Gerald Ford's inauguration as president. …

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