Stocks Mixed as Bonds Slump; Dollar Gains

Stocks ended mixed but mostly higher on Wednesday, as bonds were hit by selling one day after the Federal Reserve Board opted to leave interest rates unchanged.

In currency trading, the battered dollar finally rebounded somewhat against the Japanese yen. Elsewhere, gold prices inched up on a report that showed strong global demand for the metal in the first quarter.

On Wall Street, the Dow Jones industrials slipped 12.77 points to 7,290.69 after rising early in the day, selling off at midday, then rebounding near the close.

In the broad market, winners topped losers by 14 to 11 on the New York Stock Exchange and by 22 to 18 on Nasdaq.

Smaller stocks showed more strength than blue chips: The Nasdaq composite index gained 9.87 points to 1,373.75, and the Russell 2,000 index added 1.86 points to 370.06, nearing its all-time high of 370.65 set in January.

Blue chip issues were dragged down in mid-morning by a slumping bond market. Long-term yields jumped after the government’s report on March imports and exports pointed to surprising strength in the economy. (Story, D1.)

Although the Fed on Tuesday decided against tightening credit again--apparently believing that the economy may be in the process of slowing--Wednesday’s report reminded bond traders that the Fed could easily raise rates at its early-July meeting, if the economy continues to zoom.

“The general concern is that the economy is going to have a bounce and that might force the Fed’s hand,” said Patricia Larkin, who manages $35 billion of fixed-income investments at Dreyfus Corp.

In the bond market, the yield on the 30-year Treasury bond rose to 6.95% from 6.90% on Tuesday.

Still, shorter-term yields continued to decline. The 3-month T-bill yield sank to 5.11% from 5.21% on Tuesday and 5.31% on Monday.

In currency markets, the dollar staged a rally, helped by a shrinking U.S. trade deficit and Japanese comments indicating interest rates there won’t rise soon.

Bank of Japan policy-planning chief Takahiro Kawase said the central bank will maintain its low interest-rate policy until it confirms the strength of Japan’s economic recovery. That took some steam out of the yen: It closed in New York at 114.18 to the dollar, versus 113.04 on Tuesday.

But in Tokyo overnight, the Nikkei-225 stock index plunged 2.4% to 19,842 amid concerns about interest rates.

Among Wednesday’s highlights:

* Dell Computer’s spectacular first-quarter earnings report, released Tuesday, sent its stock soaring 7 1/8 to 106 3/4 and boosted many other tech issues as well.

Market researcher Dataquest revised its first-quarter tally of U.S. personal computer sales growth to 21.3% from the 15.2% it estimated last month..

Other tech gainers included Compaq, up 5 3/4 to 102 3/4; Intel, up 1 1/2 to 162 1/2; Digital Equipment, up 2 to 34 3/4; and Hewlett-Packard, up 1 1/8 to 54.

But disk-drive makers were broadly lower amid worries about pricing pressures. Seagate Technology dropped 2 3/8 to 43 and Western Digital declined 4 1/4 to 59.

* Bank stocks gave back some of Tuesday’s gains, with Citicorp down 3 3/8 to 116 3/4 and BankAmerica down 3 1/8 to 114 3/8.

* Blue chips hit by profit-taking included Disney, down 1 3/8 to 82 1/8; Johnson & Johnson, down 1 1/2 to 59 3/8; and Coca-Cola, off 1 to 67 3/8.

In commodity trading, near-term gold futures inched up 40 cents to $343.10 an ounce on the Comex in New York.

Gold demand rose 17% in the first quarter to a record 771 metric tons on strong consumption in developing countries, particularly India, the World Gold Council said.

Gold demand in countries such as India, Indonesia, Saudi Arabia and Turkey jumped 22% to 586.8 tons, while demand in developed countries rose just 2% to 183.8 tons, the council said.