Stocks : Early Selloff Halted; Dow Off 3.84
The stock market gave ground Monday, faced with news suggesting persistent strength in the economy. But after an early selloff, prices recovered much of their losses.
The Dow Jones industrial index closed 3.84 points lower at 2,414.96. Declines led advances 833 to 577 in thin New York Stock Exchange trading of 138 million shares, compared to 158.4 million Friday.
Stocks sank from the opening bell as investors took a dim view of a survey of purchasing managers that suggested the economy rebounded in April, reviving fears that the Federal Reserve would further tighten credit to curb growth.
But a late spurt of buying helped blue chips recoup most of their losses, leading to the modestly lower finish.
“Sellers felt they had sold everything they wanted to and pulled away,” said Philip Puccio, manager of institutional trading at Dillon Read.
“The market simply doesn’t want to go down,” said Tom Walsh, Nikko Securities’ chief of equity trading.
The Dow industrials have risen for the past five straight weeks, partly because interest rates are not likely to rise further, which has set the stage for profit taking, market analysts said.
The April purchasing managers’ index rose to 53% from 50.4% in March. A reading of over 50% in the survey by the National Assn. of Purchasing Management is seen as showing that the economy is growing.
Traders said they expected little activity on Wall Street until Friday, when the Labor Department releases U.S. employment figures for April.
The Wilshire index of 5,000 equities closed at 3,049.719, down 3.413.
Blocks of 10,000 or more shares traded on the NYSE totaled 2,784, compared to 3,574 Friday.
Financial markets in Great Britain were closed Monday for a bank holiday.
In Japan, the Tokyo Stock Exchange’s key index finished at a new high. The 225-issue Nikkei stock index gained 79.82, closing at 33,793.17. The index had gained 212.52 to set a 33,713.35 record close Friday.
Currency
The dollar wound up higher against all major currencies in a thin market Monday as the unexpectedly strong economic assessment from U.S. purchasing managers triggered buying.
Gold prices barely budged. Republic National Bank of New York quoted a late bid of $377.45 an ounce, 5 cents lower than Friday’s late bid.
Late dollar rates in New York, compared to Friday’s late rates, included: 134.125 Japanese yen, up from 133.05; 1.89065 West German marks, up from 1.8810; 1.6870 Swiss francs, up from 1.6755; 6.375 French francs, up from 6.3580; 1,383.25 Italian lire, up from 1,377.00, and 1.18725 Canadian dollars, up from 1.1853.
Credit
Bond prices fell as a result of the purchases’ report. The credit market’s benchmark 30-year Treasury issue tumbled 11/16 point, or $6.88 for every $1,000 face amount. Its yield rose to 8.99% from 8.92% late Friday.
In the secondary market for Treasury securities, prices of short-term securities were down by 3/32 point to 3/16 point, intermediate governments fell 1/4 point to 15/32 point and long-term maturities slumped from 17/32 point to 21/32 point, according to Telerate Inc., a financial data service.
The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 3.05 to 1,129.69.
Corporate issues declined. Moody’s investment grade corporate bond index, which measures the total return on a portfolio of 80 corporate bonds with maturities of five years or longer, was off 0.53 to 303.96.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds closed at 92-3/32, down 7/32 point. The average yield to maturity increased to 7.59% from 7.58% late Friday.
Yields on three-month Treasury bills jumped to 8.88% as the discount rose 10 basis points to 8.59%. Yields on six-month bills rose to 9.15% as the discount rose 10 basis points to 8.65%. Yields on one-year bills rose to 9.28% as the discount gained 8 basis points to 8.59%.
Commodities
Prices of grain and soybean futures rose strongly Monday on the Chicago Board of Trade in reaction to long-range forecasts of below-average rainfall in several grain-producing states.
On other markets, gasoline and crude oil prices rallied, cattle and hogs were up, and gold and silver prices gained moderately.
Wheat settled 4 to 6 1/4 cents higher, with the contract for delivery in May at $4.23 3/4 a bushel; corn was 4 1/4 to 5 3/4 cents higher, with May at $2.74 a bushel; oats were 5 to 6 1/2 cents higher, with May at $1.84 1/2 a bushel, and soybeans were 12 3/4 to 17 3/4 cents higher, with May at $7.35 1/4 a bushel.
Jim Ritterbusch, an analyst with Carson Petroleum Co. in Chicago, said traders who sold their gasoline contracts last week were buying the fuel and selling heating oil, betting that gasoline prices would rise.
West Texas Intermediate crude oil settled 12 to 24 cents higher, with June at $20.66 a barrel; heating oil was 0.18 to 0.31 cent lower, with June at 49.46 cents a gallon, and unleaded gasoline was 0.45 cent to 1.39 cents higher, with June at 72.61 cents a gallon.
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