NEW YORK -- Plunging interest rates sent stock prices higher for a second consecutive session.
The Dow Jones industrial average gained 3.51, to 3,404.04, after soaring 45.12 points Tuesday. The Standard & Poor's 500 Index rose 1.37, to 449.27, pitching it just below its all-time high of 449.56, set on Feb. 4. In the over-the-counter market, the NASDAQ Combined Composite Index climbed 6.20 points, to 683.92.
"Everybody's talking about bond yields going down another 150 basis points," said Edward Collins, executive vice president of institutional trading at Daiwa Securities America.
He was alluding to remarks by a Federal Reserve Board governor, Susan Phillips, yesterday. Ms. Phillips said there was little inflationary pressure to prevent long-term rates from falling further.
"You and I could sit here and say the market's overpriced, but it
doesn't matter," Mr. Collins said. "As long as bonds are OK, the stock market's going to be OK."
Declining yields on fixed-income investments tend to make the higher relative return of stocks more attractive, analysts say.
Rumors that this week's employment statistics might show stronger job growth than forecast also spurred demand for stocks, traders said. Today, the Labor Department will release the number of Americans filing first-time unemployment claims. Claims are estimated to have fallen 1,000, to 324,000, in the week that ended Feb. 20.
Tomorrow, Labor will report nonfarm job growth and the unemployment rate for February. Analysts estimate the economy gained 126,000 nonfarm jobs last month, and the jobless rate stayed at 7.1 percent, according to a Bloomberg Business News survey.
Advancing common stocks topped decliners by 2-to-1 for a second straight day. Trading was less hectic than in recent sessions, with slightly more than 275 million shares changing hands on the BigBoard.
Treasury bond yields sank below 6.8 percent yesterday for the first time since the Treasury began selling bonds regularly in 1977, amid weaker-than-expected car sales for late February and recurrent speculation of a German rate cut. The yield on the benchmark 30-year bond traded to as low as 6.77 percent, before closing at 6.78 percent.
Talk that Germany might cut interest rates when the Bundesbank meets today sent British stocks to a record high. London's FT-SE 100 Index soared 36.3, to 2,918.60.
The drop in bond yields unleashed a stampede into stocks of companies where earnings fluctuate with interest rates, traders said. Countrywide Credit Industries Inc. rose $1.125, to $34.875, after the mortgage lender said loan volume jumped 54 percent in February. Federal National Mortgage Association advanced $1, to $82.
RJR Nabisco Holdings Corp. was the most actively traded stock for the second consecutive session, falling 37.5 cents, to $8.625, after gaining on Tuesday's news that the company plans to create a new class of stock to reflect its food business.