Stocks rise on relief over gov’t debt auction

NEW YORK — The stock market is again taking its cues from the bond market.

NEW YORK — The stock market is again taking its cues from the bond market. Stocks turned higher Thursday after solid demand at a Treasury auction eased fears that the appetite for U.S. debt would dry up and force the government to pay higher interest rates to entice buyers. That in turn could endanger an economic recovery by driving borrowing rates higher for loans on homes, cars and other major purchases. Interest rate movements were tugging at the stock market for a second straight day. Investors were relieved that a $26 billion auction of seven-year notes went well Thursday, a day after sending long-term Treasurys plunging on fears that the government could eventually exhaust buyers’ appetite for debt with an unprecedented level of bond sales. The yield on the 10-year note, a key benchmark for home mortgages and other loans, edged down to 3.73 percent from 3.75 percent the day before. The yield, which moves in the opposite direction from the price of the note, reached its highest level since November on Wednesday. Stock trading was choppy Thursday, with indicators falling in the early going on disappointing news on new home sales and foreclosures, while energy shares drew support from crude oil’s advance to a six-month high above $64 a barrel. The government said sales of new homes edged up only 0.3 percent in April, less than analysts expected. A separate report showed that a record 12 percent of mortgage holders were behind or in foreclosure in the first quarter. Investors saw a bigger appetite for oil, as well as a dip in weekly unemployment claims and improving demand for big-ticket manufactured goods, as reasons to believe the economy will start growing and lift demand for raw materials. In midafternoon trading, the Dow Jones industrial average rose 55.67, or 0.7 percent, to 8,355.69. The broader Standard & Poor’s 500 index rose 11.02, or 1.2 percent, to 904.08, and the Nasdaq composite index advanced 13.44, or 0.8 percent, to 1,744.52. Light, sweet crude rose $1.61 to $65.06 a barrel on the New York Mercantile Exchange, sending energy stocks higher. Marathon Oil Corp. rose $1.66, or 5.7 percent, to $30.90, while XTO Energy Inc. rose $1.66, or 4 percent, to $42.83. Investors were also focusing on General Motors Corp., which said a committee of bondholders agreed to a sweetened deal to erase some of GM’s unsecured debt in exchange for stock. The agreement may not prevent the automaker from seeking bankruptcy court protection, but investors are eager for any signs that a reorganization would be orderly. GM shares fell 2 cents to $1.13. Homebuilder stocks fell after the disappointing reports on housing and as the prospect of higher interest rates stirred worries that already weak demand will worsen. The overall market is still keenly focused on the housing market, which analysts say must find a bottom before the broader economy can recover. "We still have headwinds ahead, in terms of the housing market going down," said Michael Sheldon, chief market strategist at RDM Financial Group. "And we don’t know how high the unemployment rate is going to peak." Among builders, Toll Brothers Inc. fell 64 cents, or 3.5 percent, to $17.39, while Beazer Homes USA Inc. fell 14 cents, or 5.5 percent, to $2.43. In other trading, the Russell 2000 index of smaller companies rose 0.70, or 0.1 percent, to 490.56. About three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 712.3 million shares, compared with 623.3 million shares traded at the same time Wednesday. The dollar was mixed against other major currencies. Gold prices rose. Overseas, Britain’s FTSE 100 fell 0.7 percent, Germany’s DAX index fell 1.4 percent, and France’s CAC-40 slid 0.8 percent. Japan’s Nikkei stock average edged up 0.1 percent. ______ Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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