Interest rates fell sharply on Tuesday, as bonds rallied on a plunge in gold prices.
At 4 p.m. in New York, the yield on the Treasury's 30-year bond was down to 6.88% from 6.97%. The drop was across the board, as the five-year note fell to 5.27% from 5.36% and the two-year to 4.14% from 4.24%.
Casino, auto, and technology issues led stocks higher. The Dow Jones industrial average gained 24.91 to 3,552.34. The Standard & Poor's 500 index gained 3.64 points, to 453.83.
Federal Reserve buying stemmed the dollar's fall against the yen. The currency was at 107.05 yen, up from 106.95 on Friday. It was at 1.5865 German marks, down from 1.5875.
Bond rates rose sharply last week amid fears of inflation and a tightening of credit. Most analysts had been expecting the bond market to tread water ahead of Friday's employment reports and next week's data on producer and consumer prices.
But the fall in prices of gold and other commodities eased inflation concerns. On New York's Commodity Exchange, gold futures fell $9 to $371.50 an ounce. The Commodity Research Bureau index fell 1.60 points to 207.
Economic Data a Factor
Astrid Adolfson, economist at MCM MoneyWatch, noted that long-term government bonds also benefited from economic data released on Tuesday.
The National Association of Purchasing Management reported a strengthening in manufacturing -- its index of activity rose to 51.1 from 49.7. A reading above 50% indicates the economy is growing.
But Ms. Adolfson noted that bond market participants focused on the group's employment index, which dropped to 43.4 from 44.4.
Personal and construction spending also were weak. Personal income, after rising four straight months, was unchanged in April. Construction spending fell 0.4% after a revised 0.1% fall the previous month.
The government auctioned $21.32 billion of three-month and six-month bills at average discount rates of 3.08% and 3.22%, respectively, versus 3.06% and 3.19% last week.