STOCKS : Bond Auction Boosts Dow to Gain of 11.94
Stock prices rose Tuesday for the seventh session in a row, as the market cheered the outcome of the first phase of a record-sized auction of government debt securities in the final minutes of trading.
The Dow Jones index of 30 industrial stocks rose 11.94 to 2,733.56.
In the broader market, advancing issues outnumbered declining ones by 5 to 4 in nationwide trading of New York Stock Exchange-listed stocks, with 813 up, 650 down and 518 unchanged.
Stocks got a boost from a well-received auction Tuesday afternoon of $10.5 billion in three-year notes from the U.S. Treasury. The auction, which supported the bond market, helped stocks gain at the close of trading.
“The results of the auction came out, and it looks as if there was very strong bidding,” said one trader. Tuesday was the first leg of a three-day, $30.5 billion U.S. note and bond sale .
CalFed led the NYSE most-active list, rising 1/8 to 17 3/8, on volume of 2.5 million shares. The thrift’s shares go ex-dividend today, and the trades Tuesday were designed to capture the payout.
American General, the second-most-active NYSE issue, rose 1 1/2 to 50 1/2. The Dow Jones Professional Investor Report said Nippon Life Insurance and Chubb might bid for the insurance company, which has put itself up for sale. American General said it has had no talks with either company but otherwise declined comment.
Twentieth Century Insurance jumped 2 to 22 5/8, an apparent reaction to expectations that insurance rollbacks under Proposition 103 will be limited.
Big Board volume came to 144.23 million shares, up from 132.76 million Monday.
In foreign trading, stock prices rose marginally on selective buying of electrical and high-technology issues on the Tokyo Stock Exchange. The fifth consecutive session of gains left the key Nikkei index at a record level. The 225-share index, which was up 782.63 Monday, inched up 14.31 to close at 30,9760.58.
In London, stocks ended higher in thin trading. The Financial Times 100-share index closed 19.8 points higher at 2,182.0. In Frankfurt, West Germany, the DAX index of 30 stocks ended off 35.67 points at 1,899.28.
CREDIT
3-Year Note Success Boosts Other Issues
Bond prices advanced Tuesday as the market gave a warm reception to the first stage of the Treasury’s three-part refunding auction.
The Treasury’s benchmark 30-year bond rose 5/32, or $1.50 per $1,000 face amount. Its yield, which falls when prices rise, declined to 8.82% from 8.84% late Monday.
The overall bond market pushed ahead on the strength of the Treasury’s auction of three-year notes. “The auction went very well,” said Raymond Stone, a partner in the investment firm Stone & McCarthy Research Associates Inc. in Princeton, N.J.
He noted that there were $37.33 billion in bids submitted for the three-year notes, or about $3.53 for every $1 in notes sold.
Stone said there has not been such strong demand for three-year notes since an auction in August, 1987.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 5/16 of a point to 89.938. The average yield to maturity fell to 7.65% from 7.68% late Monday.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.188%, unchanged from late Monday.
CURRENCY
Gold Prices Decline; Dollar Ends Mixed
The dollar closed mixed in U.S. foreign exchange trading after strengthening slightly in Europe and money brokers said the underlying direction of the American currency remained unclear.
Gold prices fell. Republic National Bank in New York quoted bullion at $369.90 an ounce, down $1.80 from late Monday.
Currency strategists said a few outside influences were affecting the dollar Tuesday, notably pent-up appetite for dollars in London after a three-day holiday weekend there and a surprisingly good sale of new U.S. debt securities at a quarterly Treasury refunding auction in Washington.
The dollar demand helped strengthen the currency, but the Treasury auction discouraged dollar buying because it suggested that U.S. interest rates won’t rise significantly, some traders said. That could make the dollar less attractive to foreign investors, relative to other key currencies.
In Tokyo, the dollar rose to 158.13 Japanese yen from 157.80 Monday. Later in London it fell to 157.92 yen. By the time trading closed in New York, the dollar fetched 157.63 yen, down from 158.15 Monday.
COMMODITIES Good Rain Forecasts Batter Cocoa Prices Cocoa futures prices declined sharply on New York’s Coffee, Sugar & Cocoa Exchange as rain forecasts improved crop prospects in Africa and South America.
On other markets, frozen orange juice futures surged, livestock and pork futures declined, grain and soybean prices retreated, energy futures were mixed, and precious metals declined.
Cocoa futures settled $55 to $68 lower, with the contract for delivery in May at $1,215 a ton.
Judith Ganes, an analyst with Merrill Lynch & Co. in New York, said cocoa prices in recent weeks had been supported by reports of dry weather in West Africa and Brazil.
Weather forecasts call for the end of the dry pattern and the start of a rainy period.
