The stock market rebounded Friday after an inflation report eased concerns that the Federal Reserve Board’s Open Market Committee will raise interest rates later this month.
While the Dow Jones industrial average climbed 56.57 points to close at 6935.46, the bond market barely reacted to the U.S. Labor Department’s report that prices paid to producers, farmers and factories fell 0.4 percent in February, the second monthly drop in a row and the largest in 18 months.
The yield on the benchmark 30-year Treasury bond fell to 6.94 percent from 6.96 percent Thursday, which was the highest since Sept. 24.
“In yet another example of just how depressed the market is over the potential for tightening, it received unambiguously friendly data and did nothing with it,” said David Ader, managing fixed-income analyst for Technical Data in Boston. “In technical terms, we call this behavior a `dead cat bounce.’ “
Ader said whatever enthusiasm greeted the report was doused by aggressive selling by large, leveraged holders.
“The big decision has to wait until the FOMC (Federal Open Market Committee) meeting on March 25. Before then, I expect choppy range trading with a bias toward weakness,” he said.
Among the most actively traded stocks was Applied Magnetics, a Goleta, Calif.-based disk-drive maker whose bid last month for Read-Rite, another California-based disk-drive maker, has prompted a sell-off in Applied’s stock. On Friday, Applied said it was abandoning its offer for Read-Rite.
Shares of Applied closed at $31.38, down $1.88, on the New York Stock Exchange, about half its $60.50 price of six weeks ago. Read-Rite closed at $26.62, down $3.12, on the Nasdaq stock market.
Employee Solutions, a Phoenix-based provider of temporary workers to small and midsize companies, was the most active stock, tumbling $9.12, or 59 percent, to $6.25, in trading of 30.2 million shares on Nasdaq. The company delayed releasing fourth-quarter earnings and said the results would fall below analyst expectations.
Ancor Communications closed down $1.75, at $4.12, on Nasdaq after the Minneapolis-based maker of computer-networking products said its auditor’s report raised questions about its ability to continue as a going concern.
Ancor said in response to the auditor’s report it is planning to issue $10 million in convertible preferred shares. The company will use the funds for product development and marketing.
