Long-term interest rates rose on Wednesday, as a disappointing inflation report continued to depress government bonds.
Afternoon buy programs helped stocks recover from morning losses. The dollar was mixed.
At 4 p.m., the price of the Treasury's 30-year bond was down about 1/4. This raised the yield to 5.99% from 5.97%.
The trading session was described as volatile. For most of the day, the yield on the long bond was above 6%. The yield has been below 6% since Sept. 3, when the government announced a surprising 39,000 drop in nonfarm payrolls.
Consumer Prices Edge Up
The bond market has slumped the last two days on news that the consumer price index rose 0.3% in August. Economists had been expecting no change, particularly after a big drop in producer prices that month.
"The market is more skittish, there is less liquidity," said Paul McCulley, chief economist at UBS Securities.
The intermediate sector of the government securities market was stronger than the long end.
The price of the 10-year note was up about 1/4, lowering the yield to 5.37% from 5.38%. Five-year notes were also up 1/4, cutting the yield to 4.71% from 4.77%. Two-year notes were up 1/8 to yield 3.84%, versus 3.89%.
The gains were surprising, considering that the Treasury announced it will auction $16 billion of two-year notes next Tuesday and $11 billion of five-year notes on Wednesday.
Astrid Adolfson, an economist at MCM MoneyWatch, said buying by municipalities to back re-fundings of tax-exempt bonds provided the impetus for some of the sector's strength.
After failing sharply in the morning, the Dow Jones industrial average finished 17.89 points higher, to 3,633.65. The Standard & Poor's 500 index gained 1.70 to 461.60. And the Nasdaq composite index rose 6.97 to 739.61.
The dollar closed in New York at 1.5955 German marks, down from 1.6085, and at 105.9 yen, up from 105.8.