FINANCIAL MARKETS : Rally Stalls as Dow Ends Week Up
Many stock prices continued to move ahead in moderately active trading Friday, but a rally in blue chips stalled as investors sold to collect profits.
The Dow Jones index of 30 industrials ended almost even at 2,635.24, off 0.19 for the day but up 27.88 points for the week.
Advancing issues outpaced declining ones by about 6 to 5 in nationwide trading of New York Stock Exchange-listed stocks, with 819 up, 679 down and 480 unchanged.
Volume on the floor of the Big Board eased to 180.61 million shares from 213.68 million in the previous session.
The performance by blue chip stocks was unsurprising: Many Wall Street watchers had expected stocks to bump into some profit taking.
“I think in some ways today was kind of a day off,” said Hugh Johnson of First Albany Corp. “It was a day of rest after the good days we’ve had recently.”
The good days carried the Dow index to two consecutive post-crash closing highs on Wednesday and Thursday. At its current level, the widely watched market measure is only 87.18 points below its record of 2,722.42 reached in August, 1987.
Broader measures of market activity managed to post new highs again Friday. The NYSE’s composite index of all its listed common stocks edged up 0.16 to 190.38 and Standard & Poor’s 500-stock index went up 0.16 to 342.15, both beating their all-time highs set Thursday.
Some of the selling involved drug stocks that had been bid sharply higher Thursday in a rally inspired by word that Bristol-Myers and Squibb planned to merge.
Squibb, which soared 24 3/4 on Thursday, pulled back slightly and fell 2 1/8 to 110 3/8. Bristol-Myers was the Big Board’s volume leader on turnover of nearly 6 million shares, and closed down 1 1/4 at 48 1/4.
Losers among the blue chips included: American Telephone & Telegraph, down 1/2 at 40 1/8; Eastman Kodak, down 1/4 at 48 1/2; Exxon, down 1/8 to 44 7/8; Philip Morris, down 2 to 155; Coca-Cola, down 5/8 to 63 1/2, and Merck, down 1 3/8 to 76 1/8.
Credit
Bond investors, exuberant about the outlook for low inflation, pushed the yield on a widely watched long-term Treasury bond below 8% for the first time since spring 1987.
Strength in the bond market eventually should spill over into lower rates for consumers on mortgage, car and education loans.
The bond market rally also means the federal government will have to pay lower interest rates on its issue of new debt next week.
The Commerce Department helped the bond market Friday with a report that indicated slow economic growth. It said personal incomes rose a lackluster 0.3% in June as consumer spending declined for a second straight month.
Bondholders generally welcome news of a slowdown in the economy because it implies less demand for goods and services, easing the risk of inflation, which erodes the value of such fixed-income investments as bonds.
The bellwether 30-year Treasury bond rose 15/32 point, or $4.69 per $1,000 in face amount, after gaining nearly 1 point in the previous session. Its yield fell to 7.985% from 8.02% late Thursday. The yield falls when the price rises.
The yield on the benchmark 30-year bond had flirted with 8% all month. Helping push it below was the Federal Reserve’s injection of new reserves into the banking system this week as well as a report Thursday showing slower-than-expected economic growth in the second quarter.
The bond had dipped below 8% during the July 11 session, but Friday was the first day since April 8, 1987, that it had finished below that level.
“What’s happening is that people are sort of coming in off the sidelines to buy bonds as the Federal Reserve easing is becoming more apparent and the inflation outlook is looking pretty reasonable,” said John Slosberg, senior fixed-income analyst at Technical Data Global Markets Group in Boston.
The federal funds rate, the interest on overnight loans between banks, traded at 8.938%, down from 9% late Thursday. The Fed controls the rate by adding or subtracting banking reserves, and many economists believe that it has set a new target of 9%, down from 9.25%.
Currency
Gold prices tumbled and the dollar was mostly higher in thin trading, although there were no major developments to spark the activity.
Republic National Bank reported a late afternoon bid of $367 for an ounce of gold, down $5.90 from Thursday. Earlier, gold fell an even sharper $6.70 on the New York Commodity Exchange, closing at $367.
Stephen Platt, a metals analyst with Dean Witter Reynolds Inc. in Chicago, said some of gold’s sharp decline was in response to the dollar’s surge in early domestic trading Friday.
But gold’s own lack of upward progress also took a toll on its price, Platt said.
The dollar generally posted modest gains in U.S. trading after rising sharply overseas.
Dealers said there was no apparent reason for an early strong advance on U.S. markets that influenced activity abroad. But the dollar couldn’t hold the gains in domestic trading and retraced some of its steps in the afternoon.
In New York, the British pound fell to $1.6527 from $1.6540 late Thursday. Earlier in London, the pound fell to $1.6455 from $1.6598.
In Tokyo, the dollar rose to a closing 139.45 Japanese yen, up from 139.35 yen at Thursday’s close. Later, in London, the dollar fell back to 139.31 yen, and in New York, it slipped to 139.20 yen from 139.25 yen late Thursday.
Commodities
Commodity futures prices tumbled as traders of crude oil, soybeans and coffee reacted to bearish signals ranging from signs of an economic slowdown to ideal growing conditions in the Corn Belt.
Crude oil futures prices continued a weeklong slide on the New York Mercantile Exchange that analysts have attributed to growing supplies and slackening demand.
West Texas Intermediate crude oil for September delivery fell below $18 a barrel for the first time since late February, and some observers predicted further losses next week.
Crude settled 14 to 19 cents lower, with September at $17.93 a barrel; heating oil was 0.55 cent to 1.03 cents lower, with August at 48.23 cents a gallon, and unleaded gasoline was 0.54 cent lower to 0.97 cent higher, with August at 52.95 cents a gallon.
Soybeans for near-term delivery plunged below $6.50 a bushel for the first time in 16 months on the Chicago Board of Trade amid expectations of continued improvement in Midwestern growing conditions.
Other grain futures also closed lower, largely in sympathy with the plummeting soybean market. Wheat’s losses were limited by rumors of new export business. The Agriculture Department announced after the close that it had targeted Algeria for sales of 1 million metric tons of wheat at subsidized prices.
Soybeans settled 1.5 to 19 cents lower, with August at $6.49 a bushel; wheat was 2 cents lower to 1 cent higher, with September at $3.8775 a bushel; corn was 2 to 3.75 cents lower, with September at $2.29 a bushel, and oats were 6 to 8 cents lower, with September at $1.36 a bushel.
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