- The Washington Times - Monday, March 6, 2006

NEW YORK (AP) — Rising bond yields triggered a sell-off on Wall Street yesterday as persistent nervousness about the economy and interest rates motivated investors to take profits.

Government bonds tumbled for a fourth straight session, sending market interest rates higher and contributing to the broader decline in stocks. The yield — which moves in an opposite direction from price — on the 10-year Treasury note leaped to a 20-month high of 4.74 percent from 4.69 percent late Friday.

“It seems like the market is obsessing on this bond market fallout, which was somewhat precipitated by the move to raise [interest rates] in Japan,” said Jack Ablin, chief investment officer at Harris Private Bank. “A lot of the fuel that has been used to invest in this bond market has been derived from ‘easy money’ in Japan.”

With Japan’s economy improving, analysts believe the country’s central bank is likely to raise rates soon; the bank’s policy-makers meet tomorrow and Thursday. U.S. investors fear that rising interest rates in other countries could contribute to more rate increases domestically.

And with little other data to quell anxiety about the economy’s health and price inflation, investors felt safer pulling out of the market despite a sharp drop in oil prices and acquisition news at AT&T; Inc. and General Motors Corp.

At the close of trading, the Dow Jones Industrial Average fell 63, or 0.57 percent, to 10,958. The Dow slid as much as 92 points shortly after midday.

Broader stock indicators also lost ground. The Standard & Poor’s 500 Index declined 8.97, or 0.7 percent, to 1,278.26, and the Nasdaq Composite Index dropped 16.57, or 0.72 percent, to 2,286.03.

Yesterday’s sole economic datapoint came from the Commerce Department, which said domestic factory orders declined 4.5 percent in January — the biggest drop in 5 years, but less than the 5.4 percent drop-off economists had forecast.

Wall Street continued its recent pattern of skittish trading as investors scoured government reports and corporate headlines for any hint of the economy’s direction. This week brings data on employment and the U.S. trade deficit, but many will be focused on the Federal Reserve’s March 28 meeting and any changes to the central bank’s monetary policy.

“I think people were optimistic heading into [Fed Chairman Ben] Bernanke’s appointment, thinking he was going to take a softer stance” and ease the Fed’s string of interest rate increases, said Rick Pendergraft, an equity trader for Schaeffer’s Investment Research. “But that’s not the case, and bonds continue to fall as rates rise.”

Oil prices sank on indications that the Organization of Petroleum Exporting Countries won’t cut production levels, with a barrel of light crude losing $1.26 to settle at $62.41 on the New York Mercantile Exchange.

Declining issues outpaced advancers by almost 12 to 5 on the New York Stock Exchange, where preliminary consolidated volume of 2.37 billion shares topped the 2.23 billion shares that changed hands on Friday.

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