US stocks rally on record treasury auction

Stocks rallied today after a record Treasury auction pushed bond yields lower, raising hopes that interest rates will follow and allaying fears that foreign investors would move away from US debt.

Wall Street was also helped by lower oil prices and sheer momentum, as the Standard & Poor’s 500 passed a price ceiling that usually triggers selling.

For the most part, however, the news that sent stocks soaring in late afternoon was nearly identical to the news that sent stocks sideways in the morning.

“We were scratching our heads,” said Brian Williamson, an equity trader at The Boston Company Asset Management, a Mellon subsidiary.

Falling oil prices, which were a downward force for stocks in the morning as energy stocks fell, helped send stocks higher in the afternoon, with retail stocks rising as worries about consumer spending were temporarily forgotten.

The Dow Jones industrial average rose 93.89, or 0.89%, to 10,640.10.

Broader stock indicators were also higher. The Standard & Poor’s 500 index rose 10.31, or 0.84%, to 1,230.96, and the Nasdaq composite index rose 20.87, or 0.96%, to 2,196.68.

Bond prices rose sharply, with the yield on the 10-year Treasury note falling to 4.56% from 4.65% late yesterday. The US dollar was mixed against other major currencies in European trading. Gold prices were higher.

Today’s auction of 10-year Treasury notes attracted a record level of indirect bids, which include foreign central banks. The auction came as a relief to investors who were worried after two auctions of shorter-term bond earlier this week failed to attact intense foreign demand.

Crude oil futures fell. A barrel of light crude settled at 57.80 dollars, down 1.13 dollars, in trading on the New York Mercantile Exchange.

Stocks have been crawling sideways for much of the year, and investors are itching for the kind of fourth quarter rallies they’ve seen the last two years. Perhaps that explains why falling oil prices, which helped push stocks lower in the morning with falling energy stocks, were a catalyst for the afternoon rally, when retailers gained as consumer spending worries were temporarily forgotten.

“We all look for catalysts, but sometimes markets go up because they’re ready to go up,” said John P Waterman, chief investment officer at Rittenhouse Asset Management.

Economic news was mixed. The University of Michigan’s mid-month report on consumer sentiment for November increased from October’s levels, according to news accounts. Michigan’s report is released only to subscribers. Analysts said the Michigan report shows shoppers were still spending freely even though sentiment was down.

The Commerce Department said September’s trade deficit soared 11.4% from August to 66.1 billion dollars, pushed higher by increased oil imports following the Gulf Coast hurricanes and a record deficit with China.

The stream of unemployment filings from the hurricanes continues, although the numbers are no greater than most analysts expected. The number of Americans who lost their jobs in the hurricanes’ aftermath rose to 542,000 last week.

Exxon Mobil, BP, ConocoPhillips and other energy companies saw sharp drops as oil prices fell.

The Russell 2000 index of smaller companies rose 5.10, or 0.77%, to 664.93.

Advancing issues outnumbered decliners by roughly 9 to 6 on the New York Stock Exchange, where volume was 1.75 billion shares, up from 1.61 billion yesterday.