Stocks End Higher Even as Yields Climb

Jittery sellers hit the bond market on Monday for a second consecutive session, but stocks still managed to close higher.

The Dow Jones industrials added 4.41 points to 8,198.45, while the Nasdaq composite index of mostly smaller stocks jumped 11.12 points, or 0.7%, to a record 1,605.45.

“It’s just amazing. This market won’t stay down,” said Thomas McManus, chief U.S. investment strategist at NatWest Markets, noting the two-session pullback in the bond market.

“Given the fact that bond yields have risen so sharply, it’s somewhat mystifying that the damage [to stocks] has been so limited.”

Bond yields had surged Friday after the government issued a surprisingly strong July employment report. The news revived fears of higher inflation and a possible Federal Reserve Board credit-tightening move sooner than later.

Those worries persisted in the bond market Monday. The 30-year Treasury bond yield closed at 6.47%, up from 6.44% on Friday and Thursday’s 6.30%, which was an 18-month low.

Shorter-term yields also edged up Monday.

The spillover concerns about Friday’s economic data overshadowed Monday’s data, which offered some support for the argument that economic activity has been slowing enough to keep inflation in check.

The Commerce Department reported that construction spending unexpectedly tumbled 1.1% in June, the worst showing in six months.

The bond market also may be nervous ahead of this week’s big Treasury auction, when the government will sell $38 billion in new three-, 10- and 30-year securities. The three-year issue will be sold today.

But even as bonds struggled Monday, stock investors seemed to be betting that Friday’s reports do nothing to change the recent status quo of decent growth with low inflation.

Although market breadth wasn’t spectacular--winners topped losers by 15 to 14 on the New York Stock Exchange and by 21 to 20 on Nasdaq--it was still positive.

Among Monday’s highlights:

* Retail shares provided some rare market leadership in advance of this week’s reports on July sales by major chain stores. The Dow’s strongest issues included Sears, up $2.13 to $64.38, and Wal-Mart, up $1.19 to $37.88.

* Leading the tech sector higher was Intel, up $3.13 to a record $96.75; Xilinx, up $3.81 to $52.81; and Lam Research, up $3.56 to $59.06.

* A strike against United Parcel Service buoyed shares of its rivals. Yellow, a trucking company, gained $1.19 to $28.25; Airborne Freight rose $1 to $48.75; and Federal Express climbed 75 cents to $63.69.

* Fisher Scientific International rose $2.44 to $50.81 after reports that Kohlberg, Kravis Roberts & Co. is considering a bid for the scientific equipment company.

* British Airways’ American depositary receipts dropped $4.75 to $100.81 after the carrier said first-quarter profit fell 36%.

In foreign trading, Mexico City’s Bolsa index rose 68.04 points, or 1.35%, to a record 5,135.24.

In Germany, the main stock index dropped 2.5%.