December 5, 2023

Stocks and Bonds: Commodities Gain as Inflation Worries Take Hold

The minutes, from the Fed’s meeting on March 15, confirmed that members of the central bank are split about whether it needs to tighten credit later this year to ward off inflation. All of the committee’s members agreed that the economy was improving.

The Dow Jones industrial average fell 6.13 points, or 0.05 percent, to 12,393.90. The Standard Poor’s 500-stock index was down 0.24 points, or 0.02 percent, at 1,332.63. The Nasdaq composite index gained 2.0 points, or 0.07 percent, to 2,791.19.

Companies that make basic materials from commodities rose as traders anticipated continued price increases for commodities. The aluminum maker Alcoa rose 2.8 percent, Newmont Mining rose 4.4 percent and Dow Chemical rose 1.3 percent.

Howard F. Ward, the chief investment officer for Gamco Investors, said the market appeared to be concerned the Federal Reserve chairman, Ben S. Bernanke, “doesn’t share the same level of concern regarding inflation that it might wish him to, and that is leading to stronger commodity prices.”

Many investors have been more focused on the policies of the Fed rather than the threat of a government shutdown if Republicans and Democrats cannot reach an agreement on federal spending levels. “There is a game of chicken going on in Washington right now to see who will move first,” Mr. Ward said.

Stocks edged lower in early trading like most world markets after China raised an important lending rate and Moody’s lowered Portugal’s credit rating.

A survey from the Institute for Supply Management reported growth at service companies last month but at a slower rate than analysts were expecting.

Technology companies climbed after Texas Instruments said it planned to buy National Semiconductor for $6.5 billion in cash. Shares of National Semiconductor rose 71 percent.

After falling several dollars earlier in the day, Apple regained most of its losses. The Nasdaq OMX Group announced a rebalancing of the Nasdaq-100 index for next month that will cut Apple’s weighting in the index to 12 percent from 20 percent. That will probably force some money managers to reduce their holdings.

Trading in the largest stocks of the Nasdaq index may be more volatile before the rebalancing takes effect, but the change may make index funds that are based on the Nasdaq more appropriate for lay investors, said John DiBacco, global head of equity finance at UBS.

“When you buy an index fund you are hoping for diversification,” he said. “If one name makes up a fifth of the index you aren’t quite accomplishing what you hoped.”

KB Home fell 4 percent. The home builder reported a first-quarter loss of $1.49 a share, more than the 25 cents loss analysts were expecting.

Crude oil prices were steady, while gold rose more than 1 percent.

Interest rates were higher. The Treasury’s benchmark 10-year note fell 17/32, to 101 6/32, and the yield rose to 3.48 percent from 3.42 percent late Monday.

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