Dow Glides Past 2,700 but Closes Off 6.06; Week’s Advance Is 91.92
The stock market closed out a week of dramatic gains and record trading volume with a modest decline Friday.
The Dow Jones average of 30 industrials slipped 6.06 to 2,685.43, but nevertheless finished the week with a gain of 93.43 points.
That surpassed the Dow’s previous record weekly gain of 92.91, set March 10-14, 1986.
Volume on the New York Stock Exchange came to 196.12 million shares, against 217.07 million on Thursday. The week’s total turnover of 1.11 billion shares represented a new high.
The Dow Jones industrial average, which first crossed the 2,700 level at mid-session on Thursday, spent part of Friday’s session above that point before pulling back.
Before the market opened, the Commerce Department reported that the nation’s merchandise trade deficit widened in June, with imports exceeding exports by $15.71 billion.
Rise in Interest Rates
The figure came in well above most advance estimates on Wall Street, and disappointed traders who had been hoping for evidence that the dollar’s long decline from early 1985 through this spring had begun to improve the competitive position of U.S. industry in world markets.
The news sent interest rates higher in the bond market, offsetting enthusiasm over the successful completion Thursday of a Treasury auction of bonds and notes.
However, as stock prices fell at the opening, brokers said they attracted buyers who had been waiting for an opportunity to get in on the bull market that passed its fifth anniversary this week. The rest of the session was pretty much a standoff between the bulls and bears.
CNW was the day’s standout performer, jumping 13 1/8 to 39. The railroad holding company said it was talking with several other parties about a possible sale or restructuring.
Newmont Mining rose 2 3/4 to 79 3/4. An investment group including Mesa Limited Partnership has acquired 9.1% of Newmont’s stock and indicated that it might increase its position.
Anticipating approval of Carter Hawley Hale Stores’ restructuring, the NYSE allowed trading in the Los Angeles retailer’s current shares as well as in the two companies that would be formed by the restructuring later this month: Carter Hawley and Neiman-Marcus Group.
The old Carter Hawley shares closed at 70, up 3/8. The “new” Carter Hawley, trading on a “when issued” basis, closed at 17 1/2, higher than the $13 anticipated in the proxy. Neiman-Marcus Group closed at 37 7/8, below the expected $39.
Bond Prices Advance
In the credit markets long-term Treasury bond prices rose as traders took a skeptical view of the Commerce Department’s report on the merchandise trade deficit.
The Treasury’s old 30-year bond rose about 7/16 point, or nearly $5 for every $1,000 in face value. The yield, which moves in an opposite direction to price, fell to 8.77% from 8.81% late Thursday.
The yield on the Treasury’s new bellwether bond was even lower at 8.74%. The bond began trading Thursday and no comparison was available.
Prices of short-term securities were mixed.
The bond market continued to rise in response to the warm reception given to the auction of $28 billion of government securities this week.
Helping the market were widespread rumors that Japanese investors might have bought as much as two-thirds of the $9 billion in 30-year Treasury bonds sold Thursday, said Robert Bannon, a money-market economist for Security Pacific National Bank.
Traders decided that the size of the June deficit was probably mainly the result of seasonal fluctuations and a broad statistical margin of error, Bannon said.
“When an indicator or an event is so far from expectation and from reasonableness, people tend to dismiss it,” Bannon said.
In the secondary market for Treasury bonds, prices of short-term governments rose about 1/16 point, intermediate maturities ranged between 1/16 point to 1/8 point higher and 20-year issues were up 5/16 point, according to Telerate Inc.
In corporate trading, industrials and utilities rose 1/2 point in light trading, according to the investment firm of Salomon Bros.
Yields on three-month Treasury bills were up 1 basis points to 5.96%. Six-month bills gained 3 basis points to 6.03% and one-year bills were up 4 basis points at 6.43%. A basis point is one-hundredth of a percentage point.
The federal funds rate, the interest on overnight loans between banks, traded at 6.75%, up from 6..69% Thursday.
