Bond Rally Begun Tuesday Fizzles Out Despite Drop in Some Short-Term Rates
NEW YORK -- A bond market rally that began Tuesday fizzled out yesterday afternoon despite a decline in some closely watched short-term interest rates.</br></br>Prices of some actively traded U.S. government bonds rose early in the morning but later faded, winding up the session little changed from Wednesday's closing levels. That performance was in sharp contrast to the stock market, where prices surged in record volume. The Dow Jones Industrial Average jumped more than 13 points to close at 1282.24.</br></br>Many economists continue to forecast slightly lower interest rates over the next few months because they expect slower economic growth. But numerous investment managers remain leery about long-term bonds, partly because of concern that recent government reports understate the economy's strength. For example, they worry that strong spending by consumers will continue, adding fuel to the economy's expansion and leading to increases in business borrowing.</br></br>Several major department-store chains yesterday reported large increases in their December sales. In addition, auto makers announced sales gains for late December. Further signs of the economy's health will appear today when the Labor Department announces unemployment statistics for December. Many analysts yesterday said they expect the civilian unemployment rate to be little changed from November's 8.4% level.</br></br>"The unemployment picture continues to show modest improvement," according to a Bankers Trust Co. report. "We anticipate that the unemployment rate drifted down to 8.3% of the civilian labor force in December," said the bank's Key Indicator Forecasts. "The continued gains in employment speak well for further improvement in consumer spending, thereby bolstering the economy as the new year unfolds."