Bond Rally and Stock Market Volatility: A Tale of Uncertainty

Strategic Insights -

The stock market experienced a bumpy ride on Wednesday, with a bond rally sparked by encouraging retail-inflation news helping the broad stock market close higher. However, last-minute sell programs knocked the Dow Jones industrial average lower in bumpy trading. Analysts cited concerns about the Federal Reserve's upcoming monetary policy meeting and potential interest rate increases as a factor in the market's volatility.

Key Takeaways:

  • The Dow Jones industrial average slid 1.44 points to 3848.15, while the New York Stock Exchange composite index rose 1.35 to 260.34.
  • The S&P 500-stock index climbed 2.41 to 469.42, with advances outnumbering declines 1,346-793 among the 2,760 issues crossing the NYSE tape.
  • The average price of a share gained 18 cents, while final floor volume slipped to 306,820,000 shares from 329,260,000 in the same period Tuesday.
  • Treasury securities ended sharply higher, with the bellwether 30-year Treasury bond climbing 28/32 to 92 31/32, and the issue's yield falling to 6.80 percent.
  • The US dollar finished mixed, with the dollar changing hands at 1.6885 German marks and 106.07 Japanese yen, down from 1.6965 marks and 106.05 yen late Tuesday.
  • Analysts cited concerns about the Federal Reserve's upcoming monetary policy meeting and potential interest rate increases as a factor in the market's volatility.
  • Tom Gallagher, managing director in charge of capital commitment at Oppenheimer & Co., said stocks' failure to rally along with bonds 'is troubling' and that the market is giving out mixed signals.
  • Alan Ackerman, executive vice president at Reich & Co., said that while the bond rally helped stocks for a while, 'the market faded in the stretch because of the late sell programs.'
  • The market's worries are now focusing on Friday's triple-witching and next week's FOMC meeting, with investors concerned about the potential for interest rate increases.

Statistics:

  • The Dow Jones industrial average fell 13.39 points on Tuesday and 1.44 points on Wednesday to 3848.15.
  • The New York Stock Exchange composite index rose 1.35 to 260.34 on Wednesday.
  • The S&P 500-stock index climbed 2.41 to 469.42 on Wednesday.
  • Advances outnumbered declines 1,346-793 among the 2,760 issues crossing the NYSE tape on Wednesday.
  • The average price of a share gained 18 cents on Wednesday.
  • Final floor volume slipped to 306,820,000 shares from 329,260,000 in the same period Tuesday.
  • Treasury securities ended sharply higher, with the bellwether 30-year Treasury bond climbing 28/32 to 92 31/32.
  • The issue's yield fell to 6.80 percent on Wednesday.
  • The US dollar finished mixed, with the dollar changing hands at 1.6885 German marks and 106.07 Japanese yen, down from 1.6965 marks and 106.05 yen late Tuesday.
  • The Nasdaq composite index climbed 5.47 to 798.99 on Wednesday.
  • Advances topped declines 1,352-1,017 among the 3,436 issues traded on the Nasdaq.
  • Centex Telemanagement led the Nasdaq actives, jumping 5 to 10 on the day.

Sources:

  • UPI Business Writer, NEWYORK, March 16