Yields Soar as Stocks Climb

Wall Street finished a slow pre-holiday session with modest gains Friday amid some upbeat economic data. Major indexes ended the week narrowly higher.

What was good for stocks was bad for bonds: Treasury yields shot up after a surprisingly strong report on U.S. factory activity in June.

The Federal Reserve signaled Thursday that it would continue raising short-term interest rates, and the manufacturing report suggested that it had ample room to do so.

The yield on the benchmark 10-year T-note jumped to 4.04% from 3.91% on Thursday. Bond yields rise as their prices fall.

“This is sort of a delayed reaction to the Fed,” said one bond trader in New York. “The Fed went out of their way to be hawkish and the market held in there, so something had to give.”

The stock market started the third quarter quietly, as many traders already were gone for the long holiday weekend.

Stocks had slumped Thursday as the Fed raised its benchmark rate a quarter of a percentage point to 3.25% and gave no indication it would stop tightening credit soon. But some analysts believed the sell-off, which sliced nearly 100 points from the Dow Jones industrial average, was overdone, and bargain hunters lifted stocks Friday despite another surge in crude oil prices.

Fresh economic data boosted optimism about business and consumer spending. The Institute for Supply Management said its index of manufacturing activity rose to 53.8 in June from 51.4 in May. Analysts had expected 51.5. Any reading above 50 indicates manufacturing growth.

Also Friday, the University of Michigan’s consumer sentiment index was reported at 96 for June, better than the 94.6 reading Wall Street expected and up from 86.9 in May.

The reports helped stock indexes advance. The Dow rose 28.47 points, or 0.3%, to 10,303.44.

The Standard & Poor’s 500 index was up 3.11 points, or 0.3%, at 1,194.44, and the Nasdaq composite index gained 0.41 point, or 0.02%, to 2,057.37.

Winners topped losers by 2 to 1 on the New York Stock Exchange.

“Clearly cooler heads are prevailing today,” said Joseph Keating, chief investment officer at AmSouth Asset Management. “We’re seeing a far more rational response to the Fed, and [Thursday’s] sell-off is making for a pretty good buying opportunity.”

For the week, the Dow added 0.05%, the S&P; rose 0.2% and Nasdaq climbed 0.2%.

In other market highlights:

* Oil prices soared as some traders locked in positions before the long weekend, although prices remained below Monday’s record of $60.54 a barrel. Near-term futures in New York jumped $2.25 to $58.75 a barrel.

Most energy stocks rallied with oil. Chevron rose $1.05 to $56.97; Occidental Petroleum jumped $2.73 to $79.66.

* Utility stocks began the new quarter with a gain, lifting the Dow utilities index nearly 1% to a four-year high of 390.36.

* Some industrial issues gained on the factory report. Nucor rose 80 cents to $46.42; Stanley Works rose 98 cents to $46.52.

* Pixar weighed on Nasdaq. Shares of the computer-animation film studio dropped $6.99 to $43.06. The company reported after the bell Thursday that second-quarter net income would be hurt by disappointing sales of “The Incredibles” home videos.

* NitroMed rallied $2.70 to $22.15 after the drug maker said samples of its BiDil pill for heart failure in black patients would be in doctors’ offices next week.