Aug 15, 2003 4 min read

By Amy Baldwin AP Business Writer

NEW YORK (AP) – Stocks rose moderately in choppy trading Thursday, rebounding despite a drop in the bond market.

Analysts said there was little to explain Wall Street’s advance, but said the gains were modest because investors were more cautious with the major indexes near their highs for the summer. Moreover, August is typically a slow month on Wall Street, a time when stocks make little progress as traders and investors take summer vacations.

“I look at it as the market has held up darn well despite the bond market crash. Keep in mind we still have very low (bond) rates,” said Gary Kaltbaum, president of Investors’ Edge Partners, a money management firm in Orlando, Fla.

In late afternoon trading, the Dow Jones industrial average was up 38.09, or 0.4 percent, at 9,309.85, having fallen as much as 52.94 in the early going. On Wednesday, the Dow declined 38.30 in the previous session.

The Dow was trading very close to its summer high of 9,323.02, the level at which it closed on June 17.

The broader market was also higher. The Nasdaq composite index rose 12.73, or 0.8 percent, to 1,699.34. The Standard & Poor’s 500 index advanced 6.45, or 0.7 percent, to 990.48.

The Nasdaq was trading near its summer high of 1,754.82, reached on July 14. And, the S&P was within reach of its summer high of 1,011.66, where it finished at on June 17.

In the bond market, the price of the Treasury’s benchmark 10-year note was down fractionally, while its yield rose to 4.61 percent.

Stocks fell in tandem with bonds on Wednesday, but found their own course Thursday. Analysts disagree as to how much the bond market has been affecting the stock market. The recent volatility in the stock market also has much to do with the fact that light volume easily sways prices.

“The move back up in (bond) interest rates serves as an excuse for investors to take some profits,” from the stock market, said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. “Because stocks are near their highs, there is resistance here. And, it is summer and there’s light volume.”

The declines in the bond market come after Tuesday’s decision by the Federal Reserve to leave interest rates unchanged and at 45-year lows. Investors are selling bonds on the belief that interest rates will rise as the economy improves. Meanwhile, stocks stumbled Wednesday as rising yields are making – for now, at least – bonds more attractive than equities.

Thursday’s economic news was positive but not enough to motivate buyers.

The Labor Department reported that wholesale priced inched up by just 0.1 percent in July. The small increase in the Producer Price Index, which measures prices before they reach consumers, came after wholesale prices rose by 0.5 percent in June and matched economists’ expectations. The report could ease the Federal Reserve’s concerns that already low inflation could turn into deflation, a dangerous slide in prices.

In a second report, the department said new claims for unemployment benefits last week crept up by a seasonally adjusted 2,000 to 398,000. Even with the rise, claims have been under 400,000 – a level associated with a weak labor market – for four straight weeks, a sign that the pace of layoffs is stabilizing. Claims hit a high this year of 459,000 in the middle of April.

Harley-Davidson rose 89 cents to $49.27 after UBS Warburg upgraded it to “buy” from “neutral.”

Texas Instruments advanced 68 cents to $20 after Soundview Technology raised its rating on the chipmaker to “outperform” from “neutral.”

Target dropped $1.65 to $38.29 on second-quarter earnings that missed analysts’ expectations by a penny a share.

McDonald’s declined 26 cents to $22.91 after Wachovia Securities lowered its rating to “market perform” from “outperform.”

Advancing issues outnumbered decliners more than 4 to 3 on the New York Stock Exchange. Trading volume came to a very light 898.95 million shares, just above the already thin 903.27 million shares exchanged at the same point Wednesday.

The Russell 2000 index, which tracks smaller company stocks, rose 2.47, or 0.5 percent, to 469.94.

Overseas, Japan’s Nikkei stock average finished Thursday up 1.7 percent. In Europe, Britain’s FTSE 100 rose 1.4 percent, while France’s CAC-40 and Germany’s DAX index each climbed 1.7 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

AP-ES-08-14-03 1519EDT