FINANCIAL MARKETS : Dow Adds 16.50 to July Hot Streak
The stock market ran its July record to nine gains in nine sessions with an afternoon advance Friday as traders sorted through a series of new statistics on the state of the economy.
The Dow Jones industrial index, up every day so far this month, rose 16.50 to 2,554.82 for its third straight post-crash high. The average was up 66.96 points for the week.
Since the end of June, the index has jumped 114.76 points.
The rally was focused on blue chip stocks, and advancing issues edged declines by a margin of 5 to 4 in nationwide trading of New York Stock Exchange-listed stocks.
Traders attributed the market’s recent gains to a growing view that the economy will not weaken enough to cause more than a mild recession.
Volume on the floor of the Big Board came to 183.48 million shares, up from 153.80 million in the previous session.
The market slumped earlier, however, knocking 26 points off the Dow at one stage, as brokers sifted through the stream of economic data that included a worrisome rise in June’s core wholesale inflation rate.
The reports from the government lent support to the widespread view that the pace of economic activity was continuing to slow, fulfilling a primary goal of the Federal Reserve’s credit policy.
The Fed reported a 0.2% drop in industrial production for June, and a decline in capacity utilization at the nation’s factories, utilities and mines.
Separately, the Labor Department said its producer price index of finished goods dropped 0.1% last month. That number came in below estimates calling for an increase of between 0.1% and 0.3%.
However, the producer price index, excluding its sometimes volatile food and energy components, was up 0.7%. That left market participants without a conclusive signal of slackening inflationary pressures, analysts said.
Time Inc. fell 4 3/4 to 145 1/4, and Warner Communications, the most active Big Board issue, rose 2 to 64 1/4.
Alcoa, which received approval from directors to buy back as many as 10 million of its shares, climbed 1 1/2 to 68 1/8.
Other gainers among the blue chips included General Motors, up 1 1/2 at 43 1/2; American Telephone & Telegraph, up 1/8 at 36 3/8; Exxon, up 5/8 at 45 5/8; General Electric, up 1/4 at 54 5/8, and Procter & Gamble, up 1 1/8 at 116 1/2.
Honeywell, up sharply in recent sessions on takeover speculation, fell back 5 to 81 in the absence of any news to back up the conjecture.
In Tokyo, stocks closed lower in extremely thin trading after languishing all day, smothered by foreign brokers launching sell programs at each sign of renewed trading activity, brokers said. The Nikkei 225-share index eased 56.39 points to close at 33,574.77.
In London, share prices ended at a new post-crash high in energetic trading buoyed by a series of rumors about potential takeover bids. The 100-share Financial Times index finished up 15.7 points at 2,273.7.
Credit
Prices sagged in the bond market and long-term interest rates rose in volatile trading as the government’s economic data wasn’t weak enough to entice the credit markets.
The Treasury’s benchmark 30-year bond fell 13/32 point, or about $4 per $1,000 face amount. Its yield, which moves in the opposite direction of its price, climbed to 8.08% from 8.03% late Thursday.
Initially, evidence of economic weakness furnished by the government reports inspired buying enthusiasm in the bond market but the rally soon faded.
Normally the credit market would welcome signs that a slowdown in economic activity is being accompanied by a moderation in inflation.
But Maria F. Ramirez, an economist at Drexel Burnham Lambert, said the market had built up hopes ahead of the numbers and pushed bond prices to very high levels. When the reports merely confirmed widely held views, traders decided to sell and collect profits.
The federal funds rate, the interest on overnight loans between banks, traded at 9.188%, down from 9.313% Thursday.
Currency
The dollar gained ground against all major currencies except the Canadian dollar in defiance of the statistics that indicated the economy is cooling off.
Typically, news of a sluggish economy would send the dollar lower on speculation that the Federal Reserve would continue easing its hold on interest rates. But dealers said the fact that the dollar didn’t fall much immediately after the figures were released encouraged players to buy the currency.
“It’s the old story of selling on the rumor and buying on the fact,” said Stephen Flanagan, a vice president at Manufacturers Hanover Trust Co.
Traders sold dollars throughout the week on the expectation that the numbers would be weak. “When they came out and they were weak, everybody was looking to buy back dollars at the same time,” Flanagan said.
Trading was volatile and heavy, dealers said.
In Tokyo, the dollar closed at 139.50 Japanese yen, up 0.45 yen from late Thursday. Later in London, the dollar traded higher at 140.40 yen. In New York, the dollar closed at 140.85 yen, up from Thursday’s 139.45 yen.
In London, the dollar gained against the British pound. It cost $1.6125 to buy one pound, cheaper than $1.6240 late Thursday. In New York, one pound cost $1.6050, less expensive than Thursday’s $1.6205.
