NEW YORK — Bond prices fell sharply Tuesday, sending long-term interest rates to their highest levels in seven months, after the Federal Reserve said it would continue its efforts to lift the economy.
Stocks edged higher after retail sales rose for the fifth straight month in November and a survey showed that large companies intend to hire more workers. The Dow Jones industrial average closed at its highest level of the year.
The Federal Reserve said it would keep up its $600 billion stimulus program because the economy isn’t strong enough to bring down unemployment on its own. The yield on the benchmark 10-year Treasury note jumped to its highest level since May 17.
Jeffery Kleintop, chief market strategist at LPL Financial, said some investors were selling Treasurys out of disappointment that the Fed didn’t increase the amount of bonds it would buy. There had been speculation the Fed would do so to offset some of the additional borrowing that will be needed to fund the nearly $900 billion cost of a tax-cut deal brokered by the White House and congressional Republicans.
The heavy selling drove prices down and pushed the yield on the 10-year Treasury note up to 3.45 percent, from 3.28 percent the day before. The jump of 17 basis points means the yield increased 5.2 percent — a huge move for one day. It’s the same as the Dow Jones industrial average rising almost 600 points in a day. The higher yield will increase borrowing costs for the government, businesses and consumers.
The Dow Jones industrial average rose 47.98, or 0.4 percent, to 11,476.54. Its previous high for the year of 11,444.08 came Nov. 5. AT&T Co. led the 30 stocks in the Dow with a 2 percent gain.
The Standard & Poor’s 500 rose 1.13, or 0.1 percent, to 1,241.59. The Nasdaq composite index rose 2.81, or 0.1 percent, to 2,627.72.
“The economy is beginning to feel more stable than it has been,” said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.
