Financial Markets : STOCKS : Treasury Sale Taken in Stride; Dow Adds 4.28
The stock market ended Thursday with a modest gain despite mixed results from the Treasury Department’s closely watched auction of 30-year bonds. The Dow Jones index of 30 industrials, which climbed 33.78 Wednesday, rose 4.28 to close at 2,644.37. The market’s best-known index had been up more than 22 points shortly before noontime.
In the broader market, advancing issues outnumbered declines by a narrow margin in nationwide trading of New York Stock Exchange-listed stocks, with 768 up, 696 down and 505 unchanged. The NYSE’s composite index fell 0.22 to 184.09.
Big Board volume came to 176.24 million shares, down from Wednesday’s 186.71 million.
Initial assessments of the Treasury auction showed lower-than-expected Japanese participation, although overall demand appeared fairly good.
“The auction was OK, but not great,” said a trader.
Steady bond prices on the secondary market helped stocks hold their ground, although the Dow had been up more than 24 points before results from the auction came in.
The blue chip indicator had risen a total of 37.39 points earlier in the week, as traders expressed optimism over the first two days of the quarterly auction.
But Thursday’s sale of $10 billion of long bonds--the third and final leg of the $30-billion auction--was considered the most important indication of foreign interest in U.S. securities.
The bonds were sold for an average yield of 8.50%, and the Treasury Department received just $18.4 billion in bids for $10 billion of bonds.
Richard Meyer, managing director of institutional trading at Ladenburg Thalmann, said the market seemed to take the mixed results in stride.
Energy stocks, which were among issues heading the market’s strong advance Wednesday, did well again Thursday as Shearson Lehman Hutton analysts upgraded many of the issues, predicting that oil prices will rise over the next several years.
Phillips Petroleum, the second most active issue, rose 3/8 to 26 1/2. Chevron climbed 2 3/8 to 70 1/4, and Amerada Hess jumped 1 1/2 to 48.
Prices on the Tokyo Stock Exchange were mixed in moderate trading, with no clear incentive to drive the market. The Nikkei 225-share index, which tumbled 364.96 Wednesday, recovered 214.37 to close at 37,516.24.
Prices rose sharply on London’s Stock Exchange, propelled higher by a bullish start on Wall Street and a stronger showing on the stock index futures market. At the close, the Financial Times 100-share index was up 23.6, or 1%, at 2,331.0.
CREDIT Weak Results Fail to Hold Down Prices Prices in the credit markets rose sharply in volatile trading as investors shrugged off the relatively weak results of the 30-year bond auction.
The average yield on the 30-year bonds was 8.50%, up from 7.87% at the last auction Nov. 14. It was the highest rate since 30-year bonds averaged 9.11% on May 11.
Economists said adequate domestic demand compensated for lower-than-normal buying by Japanese investors and that the market may have risen after the auction simply because it was completed successfully.
“Overall the refunding did not provide the excitement that some people were looking for,” said Maria Fiorini Ramirez, a managing director at Drexel Burnham Lambert Inc. “It was not a disaster. There were buyers at all levels.”
The debt securities are sold at auctions four times a year to finance the federal deficit and government operations.
The previously issued 30-year bond rose 11/16 point, or $6.88 for every $1,000 in face value. Its yield tumbled to 8.48% from 8.54% late Wednesday. Prices of shorter-term maturities also rose.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.188%, unchanged from late Wednesday.
CURRENCY Germany Concerns Push Dollar Higher The dollar ended mostly higher as the soaring West German mark ran out of steam because of profit taking and concerns about a possible monetary union between the two German states.
Gold prices rose slightly after falling overseas.
On the New York Commodity Exchange, gold bullion for current delivery closed at $418.60 an ounce, up 50 cents from Wednesday. Republic National Bank in New York quoted a late bid of $418.70, up 60 cents. Ronald H. Holzer, chief currency dealer for Harris Trust & Co. in Chicago, said the dollar continues to shadow the mark in foreign exchange, as recent reforms in East Germany and the Soviet Union are expected to benefit the West German economy.
But concerns about the implications of a proposal to unify the two German monetary systems, along with profit taking, helped push the mark lower Thursday, dealers said. That, in turn, helped support the dollar, they said.
COMMODITIES Coffee Prices Rise on Fears of Strike Prices of coffee futures rose on New York’s Coffee, Sugar & Cocoa Exchange amid mounting supply fears exacerbated by the threat of a dockworkers strike next week in Brazil, the world’s largest coffee producer.
On other commodity markets, oil futures were mixed; grains and soybeans were mostly lower, and livestock and meat futures were mixed.
Coffee futures settled 0.15 to 0.43 cent higher on heavy trading volume, with the contract for delivery in March at 82.09 cents a pound, the highest close in about a month.
Brazilian dockworkers are scheduled to vote Saturday on whether to strike, which would add to an already existing problem of shipping delays.
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