Stocks Gain But Bonds Keep Falling --- Dow's Rebound Halts Fears of Big Sell-Off; Dollar Finishes Mixed
Stock prices rebounded modestly from Wednesday's steep slide, but bond prices continued to fall, prompting concern about high long-term interest rates. The dollar rose against European currencies and was unchanged against the yen.</br></br>The Dow Jones Industrial Average gained 19.90 to 3244.86 in active trading. Standard & Poor's 500-Stock Index rose 1.28 to 411.62. But the Nasdaq Composite Index added a tidy 5.06 to 621.37.</br></br>Yesterday's gains came after a dose of high interest rates Wednesday knocked the Dow Jones industrials for a 47-point loss. The rebound squelched budding fears that Wednesday's sell-off might herald the beginning of a more serious correction.</br></br>But some analysts warned that long-term interest rates are getting dangerously high. As the prices of long-term Treasury bonds have eroded during the past month the yield on the Treasury's benchmark 30year bond has risen to 7.78% from 7.39%. A yield of 7.8%, some analysts suggest, may be enough to divert investors away from stocks' uncertain prospects of eventually fatter corporate profits and direct them back to bonds as a competitive investment.</br></br>Bond prices slipped yesterday amid confusion about the Treasury's intentions for financing the federal debt. Yesterday, Budget Director Richard Darman told a congressional committee that the administration's budget proposal assumes that the Treasury will place less emphasis on the 30-year bond as a financing instrument than in the past. But he later was quoted as saying that a decision hasn't been made on the amount of 30-year bonds to be sold at next month's refunding auction.