Rate Worries Continue to Hurt Stock Prices

Most U.S. stock indexes slumped Tuesday, the fourth straight decline on concerns about a recent jump in bond yields. A disappointing forecast from chip maker Texas Instruments added to the gloom.

Overseas, many emerging markets were particularly hard hit.

But the Dow Jones industrial average managed to squeak out a gain as investors fled to the relative safety of big-name stocks.

“The mood in the market is one of a high level of caution,” said Al Goldman, chief market strategist at A.G. Edwards. “When you get some selling coming in, it’s almost like a chain reaction -- it builds on itself.”

The Standard & Poor’s index finished down 2.38 points, or 0.2%, at 1,275.88. The Nasdaq composite index slid 17.65 points, or 0.8%, to 2,268.38.

The Dow edged up 22.10 points, or 0.2%, to 10,980.69.

But losers topped winners by more than 2 to 1 on the New York Stock Exchange and on Nasdaq.

Stocks have been hit as the benchmark 10-year U.S. Treasury note yield has risen to its highest levels since June 2004, amid signs of strength in the global economy and rising bond yields in Europe and Japan.

U.S. yields pulled back slightly Tuesday, with the 10-year T-note falling to 4.73% from 4.75% on Monday.

Higher interest rates can create a tough environment for stocks by crimping corporate profits, and also by attracting investors away from stocks and into bonds.

Shares of small-company stocks, which have led the market this year, slid sharply Tuesday. The Russell 2,000 index was down 10.10 points, or 1.4%, to 721.06, suffering its largest decline in a month, as investors fretted that higher interest rates would hurt smaller companies.

What’s more, “You’ve got commodity prices and the cyclical stocks getting hit, and all of that happens when people start to question whether the interest rates are biting,” said Jim Paulsen, chief investment officer at Wells Capital Management.

U.S. crude oil futures prices settled down 83 cents at $61.58 a barrel, pressuring shares of energy companies. A decline in copper and aluminum prices hurt shares of many mining companies.

In other market highlights:

* Shares in emerging markets, including Russia, Turkey, Mexico and Brazil tumbled on concern that rising U.S. interest rates would slow the global economy. The Mexican market fell 2.3%. The Turkish market plunged 4.6%.

The Morgan Stanley Capital International emerging markets index had its steepest loss since May 2004, falling 3%.

* Texas Instruments, the world’s largest supplier of chips for cellular phones, fell $1.07 to $31.26 after it narrowed its first-quarter guidance to the high end of its previous target, disappointing analysts.

* Fluor, the largest publicly traded U.S. construction and engineering company, slumped $5.62, or 6.6%, to $76.75 after it was removed from the “focus list” at Bear Stearns. The Aliso Viejo company had the worst performance in the S&P; 500.

* Energy shares fell on lower oil prices. ConocoPhillips declined $1.10 to $59.48. Exxon Mobil, the largest oil company, slipped 13 cents to $59.85.

* GM rose 48 cents to $20.29. The company, which had a loss of $8.55 billion last year, said it would shift away from defined-benefit pension plans for its 42,000 U.S. salaried workers to save $420 million before taxes next year and cut its year-end 2006 pension liability by $1.6 billion.

* Procter & Gamble, the world’s biggest maker of consumer goods, rose 63 cents to $60.30 and was the top contributor to the Dow average’s gain.

Also in the Dow, Honeywell rose 52 cents to $41.38 after the company’s chief financial officer said its free cash flow was increasing.

* Myogen lost $6.08 to $35.23. The company said it would receive as much as $100 million from GlaxoSmithKline as the drug makers work on two medicines that treat a lung condition. Some investors may be disappointed by the terms of the deal, said Louis Lemos, an analyst at Variant Research.

* Krispy Kreme Doughnuts rose $1.32 to $7.71 after it said it had hired Daryl G. Brewster, a former Kraft Foods Inc. executive, as the new president and chief executive of the troubled doughnut chain. Brewster previously served as president of Kraft’s North American snacks and cereals business.