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Spokane, Washington  Est. May 19, 1883

Markets mixed as bond yields rise

Associated Press The Spokesman-Review

Stocks closed mixed in uneven post-holiday trading Thursday as a rebound in bond yields stifled Wall Street’s excitement about new buyout activity and strength in the U.S. service sector.

The Institute for Supply Management’s index of service sector activity rose to 60.7 in June from 59.7 in May, indicating that non-manufacturing industries saw slightly faster expansion. The figure was better than expected, fueling sentiment that the economy is recovering from a slow first quarter.

However, the data weighed on bond prices, which were already weak after payroll company Automatic Data Processing and consultancy Macroeconomic Advisers said the private sector added 150,000 jobs last month — a good sign that the Labor Department’s report on June nonfarm payrolls Friday will show a solid rise.

As bond prices fell, the 10-year Treasury note’s yield shot up to 5.14 percent Thursday from 5.04 percent Tuesday, ahead of the July 4th holiday. On Monday, the 10-year yield had slipped below the 5 percent level for the first time since early June.

Robust data can be double-edged for the stock market; though investors want the economy to strengthen, they remain worried that it will cause interest rates to rise, which can slow down business.

But the 10-year Treasury yield would have to rise significantly to do any real damage to the stock market, said Joe Balestrino, a portfolio manager at Federated Investors Inc. “If things are good, yields are supposed to be a little higher.”

Also hurting the Dow Jones industrial average was General Motors Corp., one of the blue-chip index’s 30 components. GM was downgraded by a Bear Stearns analyst after the automaker on Tuesday posted a 21.3 percent drop in June sales compared to last year.

The Dow fell 11.46, or 0.08 percent, to 13,565.84.

Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index rose 0.53, or 0.03 percent, to 1,525.40, while the Nasdaq composite index rose 11.70, or 0.44 percent, to 2,656.65.

The technology-laden Nasdaq was lifted in part by Apple Inc., which rose $5.71, or 4.5 percent, to $132.88 after hitting an all-time high on continued enthusiasm over the iPhone. BlackBerry maker Research In Motion Ltd. also buoyed the Nasdaq, reaching a record high after saying it got cleared to sell its smartphones in China. Research in Motion rose $8.34, or 4 percent, to $216.28.

Declining issues outnumbered advancers by about 4 to 3 on the New York Stock Exchange, where consolidated volume came to 2.62 billion shares, up from 1.52 billion shares in Tuesday’s abbreviated session. Trading volumes remained relatively light with many of the big players out of the office following the July 4th holiday.

“Direction buyers aren’t there,” said Bill Groenveld, head trader for vFinance Investments.

The Russell 2000 index of smaller companies rose 1.93, or 0.23 percent, to 850.13.

Japan’s Nikkei stock average rose despite the drop in China’s stock market, gaining 0.29 percent. Britain’s FTSE 100 fell 0.57 percent, Germany’s DAX index fell 1.09 percent, and France’s CAC-40 fell 0.63 percent.