Nasdaq Up Again Despite Rate Fears; Tech Firms Lift Index to Record, but Other Stock Indicators, Bond Prices Fall
Visions of doomsday comfortably behind them, investors continued pouring money into high-tech stocks today, pushing the Nasdaq composite index to yet another record.</br></br>But while euphoria buoyed tech stocks on the first trading day of the year 2000, bond prices fell to their lowest levels since May amid rampant expectations that the Federal Reserve would raise rates to slow the economy, now that the Y2K bug is quashed. Those fears also pounded financial stocks, dragging down the Dow Jones industrial average and the Standard & Poor's 500-stock index.</br></br>"The Fed is increasingly frustrated by the tightening of labor markets, and I would not be surprised if they raised rates once or twice this year," said Eugene Ludwig, former comptroller of the currency and managing general partner of District-based Cornerstone Financial Partners.</br></br>That expectation was stoked by the release of a National Association of Purchasing Managers' index of factory activity showing evidence of continued economic strength. The index registered 55.5 in December, indicating that U.S. manufacturing expanded for an 11th straight month. On Friday, an employment report will show how strong wages have been and suggest whether the tight labor market is creating inflation pressures.</br></br>Higher interest rates would hurt profits at financial companies and the return on outstanding long-term bonds.