Stocks, Bonds Hit by Worries About Inflation; Blue Chips Fall 198.94, While Treasury Yield Goes Above 5% Mark
Bond prices continued to march lower, pushing 10-year Treasury yields above the psychologically important 5% mark to the highest level in nearly 11 months.</br></br>Simmering inflation jitters also hammered stocks, which had been at records. The bond selloff helped to send the Dow Jones Industrial Average lower for a third straight day after Monday's high -- off 198.94 points yesterday, or 1.5%, to 13266.73.</br></br>The selling in both bonds and stocks accelerated in the afternoon after influential bond-fund manager Bill Gross of Pimco said he has turned bearish on bonds. The 10-year Treasury note's price plummeted 31/32, or $9.6875 per $1,000 invested, pushing the yield up to 5.10%.</br></br>In comments posted on Pimco's Web site, Mr. Gross said 10-year yields could reach 6.5% within five years due to strong global economic growth and possible inflation -- the enemy of bond investors everywhere because it eats into the value of the interest payments they receive.</br></br>"Over the next three to five years, our secular outlook suggests that global inflation, and certainly U.S. inflation, will accelerate mildly. . . . That combination is not necessarily bond-friendly," Mr. Gross wrote. He called his statements a "major shift" after 25 years of bullishness on the bond market.