Bond yield drop pushes stocks higher

0 Comments | USA TODAY, March, 2006 | by Adam Shell

NEW YORK -- Stock prices rallied to their highest in 43/4 years Tuesday as a sharp drop in bond yields rekindled hopes that the Federal Reserve will stop raising interest rates sooner than feared.

Investors have been fretting about rising bond yields, so they welcomed signs of a not-too-hot economy in the form of weaker-than-expected retail sales in February. A moderating economy gives the Fed less ammunition to keep raising rates. However, Wall Street still expects the Fed to boost its target for short-term rates twice more, to 5%.

Investors, who warily watched bond yields on Monday climb to their highest since the Fed began raising short-term rates in June 2004, were relieved by a drop in the yield on the 10-year Treasury note to 4.69% from 4.77%.

"The...