Market Slips, Jarred by Bond Sales
The stock market settled with a small loss Friday after recovering from a bigger early setback linked to a steep fall in bond prices.
The Dow Jones average of 30 industrials slipped 5.63 to 2,057.86, reducing its gain for the week to 34.65 points.
The good news of strong February employment figures was almost too much for the stock market to handle, though, as it ignited swift selling in the bond market, pushed stocks down more than 20 points and resulted in the dollar declining against most major foreign currencies.
Declining stocks outnumbered advances by about 7 to 6 in the daily tally on the New York Stock Exchange.
It was the busiest week of the year on Wall Street, with volume at 1.04 billion shares on the New York Stock Exchange. Friday’s volume totaled 201.41 million shares, against 203.31 million on Thursday. The NYSE’s composite index lost 0.27 to 150.43.
Before the opening the Labor Department reported that the civilian unemployment rate dropped a tenth of a percentage point last month to an 8 1/2-year low of 5.7%.
Response to News
The news was seen as an emphatic signal that the economy remains strong several months after the stock market crash last October. But it was not well received in the credit markets, where traders interpreted it as a likely portent of upward pressure on interest rates.
Prices of long-term government bonds fell about $20 for each $1,000 in face value, raising their yields to the 8.4% to 8.5% range.
The more vibrant activity becomes, bond traders reason, the less likely the Federal Reserve is to relax credit conditions any further.
In the stock market, however, the response to the news was not so one-sided. After falling more than 20 points by midday, the Dow Jones industrial average began a gradual comeback that recouped most of its loss.
“The best course of the market is stable interest rates and a steady economy--not an overheated economy,” explained Charles Jensen of MKI Securities as stocks eased despite the stronger employment report.
“The employment statistics implied the economy is stronger than expected but the big surprise is that inflation could be more than previously expected,” said Bill Byers of Bear Stearns.
Relatively Stable
But Monte Gordon, an analyst with Dreyfus Corp., said the market made a “significant psychological accomplishment” when it closed above the previous post-crash high of 2,051.89 on Monday, and managing to hold it for the rest of the week.
“The first phase of the recovery from Oct. 19 has been completed,” he said.
But traders said that considering the steep fall in the bond market, coupled with sharply higher interest rates, the stock market was relatively stable.
Among actively traded blue-chip industrials, Exxon fell 3/8 to 41 7/8; Eastman Kodak fell to 43, and General Electric fell 5/8 to 44 1/8. American Telephone & Telegraph gained 1/8 to 29.
American Standard climbed 3 7/8 to 72 1/2. Black & Decker raised its bid for the company from $68 a share to a conditional price of $73 a share.
On the downside, Munford fell 3 to 17. The company said it had ended an agreement to be acquired for $21.50 a share in cash plus $5 in securities.
Precious metals stocks gained ground as the price of gold rebounded from a recent slide. ASA Ltd. picked up 1 to 47 3/4; Homestake Mining rose 3/8 to 17 1/8, and Amax Gold gained 1 7/8 to 21 1/8.
The Wilshire index of 5,000 equities closed at 2,642.67, down 2.114 from Thursday’s close.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 230.20 million shares.
London, Tokyo Higher
Standard & Poor’s index of 400 industrials dropped 0.36 to 308.98, and S&P;’s 500-stock composite index was down 0.58 at 267.30.
The NASDAQ composite index for the over-the-counter market rose 1.35 to 373.36. At the American Stock Exchange, the market value index closed at 293.74, up 1.23.
Stock prices in London extended their recent rally Friday, while Tokyo’s stock market also edged higher, fueled by heavy trading in some well-capitalized issues, dealers said.
In London, the Financial Times 100-share index ended up 21.1 points at 1,834.5.
On the Tokyo stock exchange the Nikkei 225-share index rose 19.31 points to close at 25,615.62, only 1,000 below its record high of 26,646.43, set on October 14 of last year.
In foreign exchange trading, the dollar slipped against most major currencies in worldwide foreign exchange trading as the new report on unemployment in the United States indicated the economy may be stronger than expected.
Dollar Lower
Gold prices rose sharply as the employment report reawakened worries about inflation. Republic National Bank in New York quoted a late bid for gold at $437.50 an ounce, up from $428.20 an ounce late Thursday.
In Tokyo, the dollar inched lower to 129.22 Japanese yen from 129.30 yen late Thursday. In London, the dollar fell to 128.95 yen. In New York, the dollar fell to 128.80 yen from 129.125 yen late Thursday.
In London, the British pound rose to $1.7740 from $1.7680 late Thursday. The pound rose to $1.7745 in New York from $1.77005.
Other late dollar rates in New York, compared to late rates Thursday, included: 1.68985 West German marks, down from 1.69425; 1.4002 Swiss francs, down from 1.4050; 5.7190 French francs, down from 5.7310; 1,245 Italian lire, down from 1,248; and 1.25425 Canadian dollars, up from 1.25305.
