Stocks Ride Bucking Bond Market; Yields Fall

Stocks swung wildly on Wednesday as investors first staged a love-in, then a strike, on government reports on inflation and consumer spending.

Meanwhile, the dollar fell against major currencies amid expectations of higher German interest rates.

The Dow Jones industrial average ended 32.52 lower at 7,928.32, but that small closing decline doesn’t begin to tell the day’s story.

The blue-chip index charged ahead almost 80 points and plummeted to down more than 80 points in the first hour of trading, then jerked between negative and positive territory the rest of the session.

Declining issues outnumbered advancers 15-13 on the New York Stock Exchange in heavy trading.

Most of the broad-market indexes ended lower. The Standard & Poor’s 500-stock list fell 4.51 to 922.02, the NYSE composite index fell 2.34 to 478.42, but the Nasdaq composite index rose 7.16 to 1,583.40.

Stocks rode a bucking bond market all morning, but bonds calmed in the afternoon and left stocks to their own devices. Bonds shot up more than a point in early trading, slipped into negative territory and then climbed back. As the price of the 30-year Treasury bond rose, its yield fell to 6.62% from 6.67% late Tuesday.

Analysts said the dollar’s steep slide weighed on financial markets, noting that stocks seemed to have every reason to rally after the latest economic data.

“If you were to put a gun to my head and ask for one word that moved the markets today it would be ‘currency,’ ” said Phil Orlando, chief investment officer at Value Line Asset Management.

The dollar fell to 1.8352 German marks, down sharply from 1.8645 marks late Tuesday. It also fell to 115.69 Japanese yen from 116.43.

While a weaker dollar over time can lift the earnings of export-oriented U.S. companies, it also discourages foreigners from holding dollar-based stocks and bonds.

Stocks burst higher from the opening after the government reported that the producer price index dropped unexpectedly for a record seventh month in a row in July. The PPI was off 0.1%, following an identical drop in June. Without the volatile food and energy components, wholesale prices also fell by 0.1%.

In a separate report, the Commerce Department said July retail sales rose a moderate 0.6%, reflecting a broad-based improvement in all businesses except furniture.

The reports will be among the data considered by the Federal Reserve Board next week.

Among Wednesday’s highlights:

* Retail stocks rose amid enthusiasm about the July sales figures. May Department Stores gained $1.19 to $55.13; Wal-Mart Stores rose $1 to $36.94 and J.C. Penney inched up 25 cents to $60.19.

* Drug stocks fell: Merck was off $1 to $92.63, Eli Lilly lost $2.50 to $104.50 and Schering-Plough dropped $1 to $47.63.

* Micron Technology fell $7.38 to $42.75 after Merrill Lynch & Co. analyst Thomas Kurlak downgraded the semiconductor company to near-term “neutral” from near-term “accumulate.”

But other tech stocks fared better. Applied Materials soared $9.13 to $99.38 on a strong earnings report.

In overseas trading, Tokyo’s Nikkei-225 index fell 0.5%. London’s FTSE-100 index fell 1.42%, while Frankfurt’s DAX lost 2.49%.