Stocks, Bonds Split Over Employment Report

Stock and bond investors went their separate ways Friday in judging the latest strong data on the U.S. economy, with stocks rallying while bond yields rose to 11-month highs.

The Dow Jones industrial average ended up 84.77 points, or 0.8%, at a record 11,031.59, and rising stocks outnumbered losers by a 16 to 13 margin on the New York Stock Exchange.

But in the bond market the yield on the bellwether 30-year Treasury bond rose from 5.79% on Thursday to 5.81%, the highest since last June 4.

Shorter-term yields, however, were mostly steady.

Even though the jobs report suggested that there is no significant inflationary pressure on wages despite the low unemployment rate, bond traders were on edge after Federal Reserve Chairman Alan Greenspan on Thursday raised new caution flags about the economy.

Greenspan said inflation could reemerge “possibly faster than some currently perceive” if some favorable trends in the economy were to shift.

Bond yields had dipped in midday, following the employment data, but “people wanted to sell into a rally,” said David Ging, market strategist at Donaldson, Lufkin & Jenrette Securities Corp. “We got a decent number, the market rallied and people sold.”

Some traders said the bond market also is jittery because the Treasury will auction $27 billion in new notes and bonds next week. “People don’t feel a need to rush to buy,” said John Burgess, money manager at Bankers Trust Global Investment Management.

On Wall Street, meanwhile, investors continued to snap up shares of heavy-industry companies that would be expected to benefit from a healthier global economy--led by the United States--even amid higher interest rates.

Indeed, heavy-industry stocks have powered the Dow to successive new highs lately, even as some consumer growth stocks have sold off in profit-taking.

But the buying on Friday was spread across the market. The Standard & Poor’s 500 index rose 1%, and a rally in some beaten-down tech shares pushed the Nasdaq composite up 1.3%.

For the week the Dow rose 2.3%. But the Nasdaq index fell 1.5%.

Among Friday’s highlights:

* Industrial issues up sharply included AlliedSignal, up $3.06 to $64.63; DuPont, up $1.44 to $74.13; Illinois Tool Works, up $2.88 to $80; and Vulcan Materials, up $2.50 to $50.50.

* Tech stocks rallying included Apple, up $1.38 to $45.88; Sun Microsystems, up $2.44 to $58.06; and Hewlett-Packard, up $2.63 to $79.94.

Also, IBM soared $8 to a record $217.25. Analyst Gary Helmig at SoundView Technology released a bullish outlook on IBM’s second-quarter performance.

* Fannie Mae surged $3.56 to $72.13 after Chief Executive Franklin Raines predicted that earnings per share at the biggest provider of mortgage funding in the U.S. will double during the next five years.

* Avondale Industries jumped $4.31 to $36.06 after the shipbuilder received an unsolicited buyout offer from Litton Industries for $38 a share cash. Litton also made a proposal to buy Newport News Shipbuilding. Newport News rose $5.75 to $32.75. Litton fell $1.63 to $63.13.

* Gold prices plunged after the British Treasury announced plans to sell 125 tons of gold this financial year. In New York trading, gold futures tumbled $6.80, closing at $282.90 an ounce.

Among gold stocks, Newmont Mining, the No. 1 U.S. gold miner, fell $3.31 to $22.75. Homestake Mining slid $1.19 to $9.44 and Barrick Gold lost $2.75 to $20.50.

* Media Metrix, which measures the audiences of Internet companies, more than doubled in its first day of trading. The stock closed at $45.56 a share, 168% above its $17 offering price.

In foreign trading Asian markets were sharply lower after the heady gains of recent weeks. Japan’s main index fell 2.1%, Hong Kong sank 4.2%, Thailand dropped 4.8% and Singapore was off 3.8%.

Market Roundup, C4

* LOW JOBLESS RATE: The U.S. unemployment rate hovered near a 30-year low in April. A1

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Bad News for Bonds

Long-term Treasury bond yields rose again on Friday, hitting their hightest level since last May, on concerns about the economy’s strength. Monthly closes and latest for the 30-year Treasury bond:

Friday: 5.81%

Bloomberg News