Stocks Mixed as Bond Yields, Oil Prices Jump

Wall Street closed mixed Wednesday in the face of another surge in bond yields and a fresh six-year high in crude oil prices.

The Dow Jones industrials, which hit a record high Tuesday, slumped 51.18 points to 6,549.48 on Wednesday.

In the broad market, most major indexes closed modestly lower. But smaller stocks showed strength, with winners topping losers by 22 to 19 on Nasdaq and the Standard & Poor’s small-cap stock index adding 0.22 point to a record 146.07.

There was little direction to Wednesday’s session until bond yields jumped in late trading. The yield on the bellwether 30-year Treasury bond ended the day at 6.84%, up from 6.78% on Tuesday and the highest since late October.

The bond’s yield was at 6.54% as recently as Dec. 27.

The bond market has been jittery ahead of two key economic reports: today’s data on December wholesale inflation and Friday’s data on December employment. As usual, bond investors fear anything that would suggest higher inflation or stronger economic growth, because either trend would mean higher interest rates.

“Everyone seems to be negative on bonds,” said John Burgess, who helps manage $70 billion of bonds at Bankers Trust Global Investment Management in New York.

The stock market, meanwhile, has largely ignored the bond market’s latest turmoil--perhaps because bonds’ record of correctly anticipating the tone of economic reports hasn’t been exceptionally accurate over the last year.

Besides, inflation indicators are plainly mixed. The price of oil keeps rising, with New York Mercantile Exchange near-term crude futures adding 39 cents to a six-year-high of $26.62 a barrel Wednesday, as cold weather and Russian President Boris Yeltsin’s latest health problems spurred the gains. (Russia is a major oil producer, so instability there could rile the world energy market.)

But the price of gold--a bellwether for inflation trends, historically--hit 3 1/4-year lows Wednesday, amid fears of heavy central bank gold sales this year. Near-term gold futures in New York lost $3 to $355.80 an ounce.

Meanwhile Wednesday, President Clinton met with Federal Reserve Board Chairman Alan Greenspan, in what the White House said was a “regular” meeting. Separately, New York Fed Bank President William McDonough, asked whether the U.S. stock market is overvalued, said he had “no idea” but that by “all conventional measures” the market appeared “rather fully valued.”

Elsewhere, in Tokyo stocks fell to a 13-month low, hurt by concerns about sluggish economic growth and the country’s still-weak banking system. The Nikkei-225 index dropped 215.81 points, or 1.1%, to 18,680.38.

Among Wednesday’s highlights:

* Some technology issues tumbled, with Netscape plunging 10 7/8 to 47 7/8 after an analyst at Deutsche Morgan Grenfell reportedly downgraded the Internet software stock. Also, Shiva sank 15 5/8 to 19 1/4 in the wake of a downbeat earnings forecast by the maker of telecom equipment.

On the plus side, Motorola advanced 2 1/8 to 63 5/8 ahead of its earnings report today.

* Some industrial issues continued to gain, including Ameron, up 3/4 to 49 1/2; Hercules, up 2 7/8 to 46 5/8; and Nucor, up 1 3/4 to 54 3/8.

In foreign trading, Mexican stocks reached record highs, with the Bolsa index up 41.84 points at 3,557.97.

Market Roundup, D5