Profit Taking Narrows Stock Gains; Dow Up 2
Stocks moved broadly ahead in active trading Tuesday, but profit taking late in the session helped narrow the market’s gains.
Telephone, energy and steel issues paced the advance, while several retail and drug stocks retreated.
The Dow Jones average of 30 industrials edged up 2.47 to 1,323.03 after having been up nearly 13 points earlier in the day and trading above its record closing high of 1,327.28 reached June 6.
Advances outpaced declines by about three to two on the New York Stock Exchange, whose composite index gained 0.32 to 109.97.
Big Board volume swelled to 115.66 million shares from 96.04 million Monday.
Prices spurted higher in early trading after the Commerce Department said new factory orders for durable goods jumped 4.1% in May from the preceding month.
While much of the gain reflected a sharp increase in defense-related orders, non-military orders rose 1.1%, the department said. Overall orders edged up only 0.2% in April.
The report added to recent indicators showing the economy gaining strength from its sluggish performance in the first quarter. Bond prices have been falling as a result, since a stronger economy makes it less likely that the Federal Reserve will further ease credit and drive interest rates lower, credit analysts said.
Much of the market’s attention again was focused on takeover situations. General Foods, rumored to be a takeover target, jumped 1 7/8 to 82 1/8.
American Broadcasting rose 1/2 to 113 1/2 and Capital Cities Communications was unchanged at 223 after the companies’ proposed merger was approved by their stockholders at separate meetings.
American Hospital Supply, which earlier agreed to merge with Hospital Corp. of America, fell 1 3/4 to 36 3/4 after rejecting a rival offer from Baxter Travenol, which was unchanged at 16. Hospital Corp. dropped 1 to 48.
Elsewhere on the NYSE’s active list, Southern California Edison fell to 27 1/8, Manufacturers Hanover rose 3/8 to 39 3/8, International Business Machines gained 1 1/8 to 122 and Digital Equipment climbed 1 1/2 to 93.
Rubbermaid rose 3/8 to 50 as the company announced a 2-for-1 stock split payable Sept. 3 and raised the dividend on pre-split shares.
General Motors dropped 1 1/2 to 71. An unexpectedly weak performance by GM contributed to a 7.4% decline in mid-June domestic auto sales.
The federal funds rate, the interest on overnight loans between banks, fell to 7.438%, down from 7.563% on Monday.
In bond markets, traders said bond prices were also under pressure from the government’s plan to auction $17 billion in four-year and seven-year notes and 20-year bonds this week.
In the first stage of that sale, the Treasury auctioned $6.5 billion in four-year notes at an average yield of 9.72%, the lowest level for such an issue since the 8.99% yield on June 30, 1980.
The yield at the last four-year note auction averaged 11.30%.
In the secondary market for Treasury bonds, prices of short-term governments fell 7/32 point, intermediate maturities dropped 3/4 point and long-term issues were down 26/32 point, according to the investment firm of Salomon Bros. The movement of a full point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
Among tax-exempt municipal bonds, general obligations fell point and revenue bonds were little changed, Salomon Bros. said.
In corporate trading, industrials fell 3/8 point and utilities were off point in light trading, the investment firm said.
Yields on three-month Treasury bills edged up 1 basis point to 7.08%. Six-month bills were up 2 basis points at 7.28%, and one-year bills were up 6 basis points at 7.48%. A basis point is one-hundredth of a percentage point.
Yields on 30-year Treasury bonds edged up to 10.70% from 10.62% on Monday.