Dow Gains 10.84 in Mixed Market
Blue chip stocks staged a mild rally Monday, boosted by firmer bond prices, a buoyant dollar and reduced inflation fears.
However, the broader market remained weaker, depressed by a general wariness over the outlook for interest rates. Declining issues slightly outnumbering advances in nationwide trading of New York Stock Exchange-listed stocks.
“At best there is a malaise among individual investors and institutions. There’s a lot of uncertainty and no need to get involved,” said Hugh Johnson, chief investment strategist for First Albany Corp.
The Dow Jones index of 30 industrials, down 68.46 points last week, recovered 10.84 to 2,071.83.
Volume on the floor of the Big Board came to 215.14 million shares, against 148.88 million in the previous session.
Prices spent most of the session narrowly mixed in mostly thin, directionless trading, traders and analysts said. Brokers said the market was dominated by professional traders and there was no sign of broad participation from individuals and institutions.
Nearly half of Monday’s activity came in just two issues--Southern Co., up at 22 3/4 on volume of nearly 74 million shares, and Pinnacle West, down 1/8 at 24 7/8 on turnover of more than 25 million shares.
Analysts said both were the targets of large-scale trading strategies based on the companies’ impending dividend payments.
Traders and analysts said the individual and institutional investor shied away from the market, concerned about how today’s release of durable goods figure for June and Wednesday’s second-quarter gross national product data may affect credit market interest rates.
Expect Increase
“The durable goods figure is due out tomorrow and the interest rate picture could be swayed by a stronger-than-expected number,” said trader Jerry Hinckle of Sanford Bernstein & Co.
Economists are looking for an increase of 2% in June durable goods, compared to a decline of 2.5% in May.
Inflation worries were doused a bit as commodity prices fell steeply, with oil, precious metal and agricultural commodities futures all moving lower.
The fear of a rise in interest rates cast a pall over the positive second-quarter earnings performances reported by many companies, and somewhat dimmed investors’ hopes for future earnings results, market analysts said. This concern caused share prices to fall in the broader market.
“We’ve got a standoff. Although earnings have been fairly good for most groups, they have been neutralized by higher interest rates and the decline in the dollar recently,” said First Albany’s Johnson.
However, firm bond prices and a stronger dollar gave blue chips a boost.
The dollar advanced on the expectation of a strong GNP figure Wednesday, after pulling back from recent gains.
The rise in the dollar sent gold prices tumbling $16 an ounce and helped ease pressure on interest rates. The benchmark 30-year Treasury bond gained about $3 for every $1,000 of face value, lowering its yield to 9.16% from 9.19% on Friday.
Blue Chip Gainers
Grain futures tumbled in Chicago after additional rainfall hit the Farm Belt over the weekend, helping reduce inflation worries. The closely watched Commodity Research Bureau index of futures fell 5.02 to close at 253.63.
Gainers among the blue chips included International Business Machines, up 2 at 122 3/8; General Electric, up 1/2 at 41 3/4; General Motors, up 1 3/8 at 80, and Philip Morris, up 3/4 at 89.
Japanese stocks were broadly higher, amid what some analysts described as a “squeeze” on short sellers who had borrowed the stock and sold it in hopes of profiting from a decline.
Matsushita Electric climbed 10 1/2 to 218 1/2, Honda Motor rose 2 3/4 to 177, Kyocera gained 6 1/8 to 91 1/2, Hitachi added 2 5/8 to 146 7/8, Pioneer Electronics rose 3 3/4 to 55 and Sony added 4 to 49.
Precious metals stocks fell as gold and silver prices tumbled. ASA Ltd. lost 1 to 40 5/8, Hecla Mining fell 7/8 to 15 5/8 and Callahan Mining dropped 1 1/8 to 19.
Postal Instant Press, traded on the American Stock Exchange, dropped 1 7/8 to 15. The company said financing delays had occurred in a planned buyout at about $17.41 a share.
The Wilshire index of 5,000 equities closed at 2,648.572, up 6.622.
The NYSE’s composite index of all its listed common stocks gained 0.49 to 149.74.
Standard & Poor’s industrial index rose 1.58 to 305.94, and S&P;’s 500-stock composite index was up 1.18 at 264.68.
The NASDAQ composite index for the over-the-counter market dipped 0.23 to 387.12. At the American Stock Exchange, the market-value index closed up 1.43 at 304.68.
In foreign trading, the Nikkei 225-share average closed at 27,183.53, down 117.81, on the Tokyo Stock Exchange.
Prices fell in quiet trading on the London Stock Exchange as the market awaited British economic reports due later in the week.
The Financial Times 100-share index fell 6.3 points to 1,838.5, after sinking as low as 1,826.7 shortly after the opening.
