FINANCIAL MARKETS : STOCKS : Dow Average Rises 10.14 in Light Trading
Blue chip stocks managed to score modest gains Thursday but an increase in bond market interest rates limited the rise in the broader market, which ended mixed.
The Dow Jones index of 30 industrials closed up 10.14 points at 2,676.58.
Volume on the New York Stock Exchange was a light 141.3 million shares, compared to 133.5 million shares Wednesday.
In the broader market, declining issues outnumbered advancing ones in nationwide trading of New York Stock Exchange-listed stocks, with 677 up, 764 down and 521 unchanged.
Stocks rose early in the session as the market tried to build on Wednesday’s 11.94-point advance--the first in the last six sessions.
But buying was largely confined to the blue chips, and the broader market was held back by weakness in the bond market.
“Compaq led them up,” said one trader, referring to the personal computer maker. Other well-known issues such as Procter & Gamble, Du Pont, Bristol-Myers Squibb and Philip Morris also attracted buyers.
“This points out that at these levels, investors will still do some selective buying,” said Alfred Goldman, director of technical research at A. G. Edwards & Sons.
The broader market, however, was held back by lingering concern about higher interest rates in the bond market, where inflationary fears have been mounting.
Stock trading was also quiet ahead of today’s government report of its initial estimate of first-quarter economic growth.
Economists project growth of about 2.4% in the quarter, up from 1.1% in the last three months of 1989, when the economy was especially weak.
A sharp rise in the gross national product, however, could add to a growing sense that inflation is rising. That in turn could prompt higher inflation-fighting interest rates from the Federal Reserve.
Higher interest rates depress stock and bond prices as they compel investors to put cash into money markets, CDs and other high-yield accounts.
Among selected issues, Compaq Computer’s surprisingly strong first-quarter earnings boosted its stock 4 1/4 to 98 1/4.
Consumer goods company Procter & Gamble gained 1 1/4 to 70 3/4 a day after reporting a 30% jump in profits for its third fiscal quarter. At least five brokerage firms made positive comments on the stock.
Xerox Corp. fell 1 1/4 to 51 after it reported weaker-than-expected earnings.
The Tokyo Stock Exchange’s key index fell moderately. The 225-share Nikkei index lost 139.78 points, closing at 29,424.58.
Share prices also closed lower on the London Stock Exchange, after buying interest dropped off late in the session. The Financial Times 100-share index finished down 9.5 points at 2,133.6, just above its session low of 2,132.5.
CREDIT Bond Yields Close Above 9% Mark Bond prices dropped over concern about upcoming bond issues and interest rates, pushing yields above 9% for the first time in almost a year. But the higher yields still failed to attract much buying interest, traders said.
The Treasury’s closely watched 30-year bond lost 23/32 point, or $7.19 for each $1,000 in face value. Its yield, which rises when prices decline, advanced to 9.04% from 8.98% late Wednesday.
The last time 30-year bonds finished at prices that yielded more than 9% was May 11, 1989, when they settled at 9.07%.
The market continues to be concerned that upcoming bond issues, principally the Treasury’s quarterly refunding auction next month, will not be well received, pushing yields up even higher.
“The main concern is that the foreigners, particularly the Japanese, will start scaling back their purchase of securities,” said Gib Clark, chief bond trader for Daiwa Securities Inc.
Interest rates in Japan and West Germany have risen enough recently to make investments in those countries more attractive than U.S. Treasury securities, he said.
But “we’re not seeing any domestic buyers either,” Clark added.
The bond market also continued to be concerned by the Treasury’s auction Wednesday of two-year notes, which sold at an average yield of 8.9%, the highest yield in a year for that type of new issue.
“The two-year is usually a decently received security,” said Kevin Flanagan, a money market economist for Dean Witter Reynolds Inc. “It got people concerned with the upcoming supply.”
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.188%, unchanged from late Wednesday.
CURRENCY Dollar Rebounds in Domestic Trading The dollar finished mostly higher in dull U.S. trading after falling in Europe.
Gold prices fell in New York after rising in Europe. Republic National Bank of New York quoted a late bid for gold of $370.60 an ounce as of 4 p.m. EDT, down from $371.25 late Wednesday.
The dollar moved in a narrow range in advance of today’s release of U.S. gross national product data for the first quarter, analysts said.
“It was a corrective uptick,” said James Chorek, an analyst at Money Market Services in Chicago. “There wasn’t much happening on fundamental ground to move the dollar one way or another.”
Analysts said the dollar got some support late in the day when bond prices dropped, pushing the interest rate on the Treasury’s key 30-year bond over 9%. Rising U.S. rates usually bolster the dollar.
COMMODITIES Supply Jitters Lift Grain and Soybeans Grain and soybean futures prices closed higher on the Chicago Board of Trade as speculation of low soybean exports from South America spurred interest in the U.S. crop.
On other markets, precious metals futures mostly were lower; energy futures declined and livestock futures were mixed while pork mostly was higher.
Wheat settled 1 cent lower to 2.75 cents higher, with the contract for delivery in May at $3.705 a bushel; corn was 2 to 2.75 cents higher, with May at $2.8075 a bushel; oats were a 1 cent to 1.50 cents higher, with May at $1.6025 a bushel, and soybeans were 14 cents to 19.25 cents higher, with May at $6.2625 a bushel.
Soybean prices for nearby months reached season highs and later months reached contract highs as commission houses entered the market strongly and the price of Brazilian soybeans surged.
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