FINANCIAL MARKETS : STOCKS : Interest Rate Decline Sends Dow Up 5.63
Stocks managed a slight gain Thursday, helped by a U.S. Treasury auction of 30-year bonds that left the bond market higher and lowered interest rates.
The Dow Jones index of 30 industrials, which had slipped 0.68 on Wednesday, rose 5.63 to 2,738.51.
In the broader market, advancing issues outnumbered declines by more than 4 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with 847 up, 601 down and 522 unchanged.
The Treasury’s sales of three-year and 10-year notes Tuesday and Wednesday both met with what analysts described as good receptions.
But many observers believed that the sternest test of the interest rate outlook came in Thursday’s offering of $10 billion in 30-year notes, which came to a less definitive outcome. The issue sold at an average yield of 8.84%, producing no great surprise favoring either the bulls or the bears.
Brokers noted that upward pressure on interest rates has lately been concentrated in the longest-maturity sector of the credit markets.
“The market has had its eye on this Treasury refunding for a fair amount of time. I believe that’s been one of the stumbling blocks to getting this market moving,” said Gene Jay Seagle, director of technical research at Gruntal & Co.
The benchmark 30-year bond ended the day up about a third of a point.
Another source of uncertainty was the impending report today on the producer price index of finished goods for April. The index, a closely watched gauge of inflationary pressures, is expected to show a rise in the 0.1% to 0.3% range.
Gainers among the blue chips included Eastman Kodak, up 1 at 39 1/8; General Electric, up 1/2 at 67 1/4 ; Bristol-Myers Squibb, up 7/8 at 59 3/8; International Business Machines, up 1 1/8 at 112 3/8, and American Telephone & Telegraph, up 3/4 at 41 1/4 .
Honeywell gained 1/8 to 95, trading at 52-week highs. The company said it had decided to spin off its defense and marine systems business after failing to find a buyer for those operations.
Gap Inc. climbed 3 7/8 to 67 3/8. The company reported a 25% jump in same-store sales for April, pacing what analysts described as a good month for apparel sales in general.
Big Board volume totaled 158.46 million shares, up from 152.22 million in the previous session.
Tokyo stock prices closed higher on optimism that the yen would continue to strengthen against the dollar despite its decline on the day. The key 225-share Nikkei index closed up 34.65 points at 30,980.26.
Prices fell on the London Stock Exchange, weakened by profit taking and declines among blue chip stocks. The Financial Times 100-share index finished 5.7 points lower at 2,157.0. In Frankfurt, West Germany, shares finished mixed. The DAX 30-share index ended 3.16 points lower at 1,893.42.
CREDIT Bond Prices Rise as Auction Winds Up Bond prices pushed higher with the completion of the government’s auction of $10 billion in 30-year bonds.
In the secondary market for already issued 30-year bonds, prices rose 9/32 point, or about $2.80 for every $1,000 in face value. Their yield fell to 8.83% from 8.86% late Wednesday.
The bond market also got a lift from a new government report on consumer credit that indicated credit demand may be growing slower than expected, lessening pressure on interest rates, analysts said.
The Federal Reserve said Americans’ consumer credit rose at a seasonally adjusted 4.4% annual rate in March.
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 Falls Against Swiss Franc, Mark The dollar fell to two-year lows against the Swiss franc and West German mark but managed to gain ground against most other foreign currencies.
Investors continued to flock to the Swiss franc, sending the dollar to levels not seen since April, 1988.
“It’s the Swiss leading the way here and it has been for the last 48 hours,” said Andrew Ellott, international foreign exchange dealer at Chase Manhattan Bank in London.
The Swiss currency moved aggressively higher in overseas trading, and dealers struggled to assess whether talk that $2 billion had been sold to buy Swiss francs was more than a rumor.
“It may have happened,” said Bob Morrissey, a senior trader with Bank of Boston. The franc has been rising because of high Swiss interest rates, strong Asian demand and the increasing view of the franc as a “safe haven” currency.
The dollar finished mixed in Europe and initially rose when trading shifted to the United States. But the U.S. currency fell back when traders, “who retain an overwhelmingly bearish outlook, sold into the dollar’s strength,” said Marc Chandler, an analyst with MMS International in Chicago.
In Tokyo, the dollar fell to a closing 156.75 Japanese yen from 157.03 yen on Wednesday. Later in London, it rose to 156.97 yen. In New York, the dollar rose to 156.73 yen from 156.50 yen on Wednesday.
In London, the British pound fell to $1.6770, from $1.6785 late Wednesday. In New York, it cost $1.6775 to buy one pound, cheaper than Wednesday’s $1.6785.
Gold prices fell after rising overseas.
In precious metals trading, gold bullion for immediate delivery on the New York Commodity Exchange fell $1.80 an ounce to $370.10. Republic National Bank in New York also quoted bullion at $370.10 an ounce as of 4 p.m. EDT, off $1.80 from late Wednesday.
COMMODITIES Grain, Soybeans Up in Cautious Trading Grain and soybean futures closed mostly higher in quiet trading on the Chicago Board of Trade.
Trading was subdued in advance of the Agriculture Department’s first estimate of U.S. winter wheat production, corn and soybean production, and new supply and demand tables.
On other markets, precious metals and copper were mixed, while livestock, pork and energy futures were mostly lower.
After trading ended, the USDA estimated winter wheat production at a nine-year high of 2.09 billion bushels, up 44% from last year’s drought-reduced harvest of 1.45 billion bushels.
Winter wheat is planted in the fall and harvested the following year. It accounts for about three-fourths of the U.S. total wheat production. The remainder is produced in spring.
The 1990 corn harvest was projected at 8.1 billion bushels, up from 7.53 billion harvested last year. Soybean production was projected at 1.925 billion bushels, nearly identical to the 1.927 billion bushels in 1989.
Analysts said the winter wheat harvest estimate was larger than expected, adding that they believe that the figure would be a drag on prices in today’s trading.
On Thursday, strong activity in the European meal market gave a boost to soybean futures, as did steady demand in the export market.
Corn futures were boosted by rain and cool temperatures in the Midwest, which could cause delays in planting both corn and soybeans, said Pat O’Connell, an analyst with Refco Inc. in Chicago.
Wheat futures received some support from the Soviet Union’s latest bid for 550,000 metric tons of wheat under the export bonus program.
Wheat settled 2.50 cents lower to 2.50 cents higher, with the contract for delivery in May at $3.82 a bushel; corn was 0.75 cent lower to 3.25 cents higher, with May at $2.8925 a bushel; oats were unchanged to 0.75 cent higher, with May at $1.655 a bushel, and soybeans were 3 cents lower to 1.25 cents higher, with May at $6.48 a bushel.
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