FINANCIAL MARKETS : STOCKS : Bond Auction Boosts Market; Dow Gains 24
Wall Street stocks closed with strong gains Thursday, pushed higher in late trading by a surge in the Treasury bond market after investors showed unexpected zeal for the government’s auction of new bonds.
After it languished for much of the day, the Dow Jones industrial index rallied to close with a solid gain of 24.01 points at 2,758.91.
Demand continued to return for many growth stocks that were pummeled in the last week. But the market’s tone remained cautious overall, with Mideast tensions still high and the outcome unpredictable. Volume on the New York Stock Exchange was moderate at 155.8 million shares, compared to Wednesday’s 190.4 million shares and the turnover Tuesday of more than 200 million.
NYSE gainers outpaced losers by an 833-to-671 margin.
“We’re in the dust-settling phase,” said Ralph Acampora, director of technical research at Prudential-Bache Securities. “I think we’ve seen the worst for the market near-term--we’ve had unbelievably emotional trading.
Traders temporarily put aside worries that the Persian Gulf conflict may escalate after President Bush sent U.S. troops Tuesday to protect oil-rich Saudi Arabia against an Iraqi attack.
In other markets:
* Several retailers gained following reports of strong July sales results. Oppenheimer & Co. reiterated its buy rating on Gap and Limited after the two companies turned in robust figures. Gap added 2 to 55 3/4 and Limited rose 1 1/4 to 19 5/8.
Other gainers in the group included May Department Stores, ahead 2 3/4 to 46 3/4, and Wal-Mart, up 3/8 to 30 5/8.
* Oil stocks were mixed, as traders pulled back. But among other issues, food and consumer stocks continued to attract a following. Philip Morris rose 7/8 to 46 1/2, CPC International rose 2 3/8 to 78 5/8 and General Mills rose 2 3/8 to 88.
* Many growth stocks also rebounded, including biotech firm Amgen, up 4 1/2 to 87; computer chip maker Intel, 2 1/8 to 39 1/4; tennis shoe maker K Swiss, 2 1/4 to 23 1/2, and computer firm Teradata, 1 1/4 to 25 1/4.
* Continental Airlines climbed 1 3/4 to 6 1/4 after Scandinavian Airlines System said it was buying a 6.9% stake in the firm, boosting its total holdings to 16.8%.
* Walt Disney Co. gained 1 3/4 to 109 3/4 after Goldman Sachs reiterated its buy recommendation on the firm and discounted market rumors circulating Wednesday that Disney may be seeking to acquire MCA, Paramount Communications or CBS.
In Tokyo, the stock market resumed its downward course after a fleeting burst of confidence on Wednesday. The 225-share Nikkei plunged 893.41 points, or 3.13%, to close at the day’s low of 27,615.73.
In London, the Financial Times-Stock Exchange 100 index ended up 7.4 points at 2,244.9 after touching 2,254.1. In West Germany, the 30-share DAX index jumped 32.00 points, or 1.9%, to 1,755.63.
CREDIT
Prices Climb on Hopes of Stability High yields and a whiff of stability in financial markets drew unexpectedly keen bidding to the government’s bond sale Thursday, making it by far the most successful of the week’s auctions.
The sale of $10.25 billion of 30-year bonds went much more smoothly than the auctions of 3-year and 10-year notes on Tuesday and Wednesday, when results were poor.
The long-bond auction meant a strong finish for the record sale of $32.25 billion in new securities to finance government operations. It also overturned early expectations of a weak showing and boosted prices in the bond market, which in turn lifted stocks.
In the open market, the 30-year bond added 26/32, or $8.125 per $1,000 face amount, its first rise since the Iraqi invasion of Kuwait on Aug. 2. The yield fell to 8.77% from 8.84% Wednesday. As bond prices rise, their yields fall.
Investors have pummeled bond prices since Iraq’s action sent oil prices soaring on fears of supply disruptions, igniting fears of a sharp rise in inflation. The long-bond yield ended at 8.35% on Aug. 1.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8%, down from 8.125% Wednesday.
COMMODITIES
Soybean and Wheat Futures Advance Grain analysts predicted a rally in corn and soybean futures prices after the Agriculture Department on Thursday released harvest projections that fell short of market expectations.
Soybean futures rose Thursday on the Chicago Board of Trade in anticipation of the report. Wheat futures also advanced while corn retreated.
On other commodity markets, gold and silver futures advanced, with September gold gaining $2.60 to end at $385.80 per troy ounce in New York. Oil futures fell, and livestock and meat futures were mostly lower.
Wheat futures settled 3 1/2 to 6 cents higher, with the contract for delivery in September at $2.90 1/4 a bushel; corn was unchanged to 2 cents lower, with September at $2.50 1/4 a bushel; oats were 2 1/4 to 3 cents higher, with September at $1.19 1/2 a bushel; soybeans were 1/2 cent lower to 6 1/4 cents higher, with August at $5.98 1/4 a bushel.
In a report released after the close, the USDA estimated the 1990 corn harvest at 7.85 billion bushels, up 4% from last year’s crop. The government projected a soybean crop of 1.84 billion bushels, down 5% from last year’s harvest of 1.93 billion bushels.
Both numbers were below market expectations.
CURRENCY
Traders’ Interest in Dollar Wanes a Bit The dollar turned in a mixed performance in U.S. trading Thursday after moving mostly lower in earlier dealings abroad.
Interest in the dollar as a safe investment haven waned in the absence of fresh Middle East hostility, currency dealers said.
Earlier this week, as outcry over Iraq’s occupation of Kuwait intensified, investors scrambled to buy dollars. Investors typically turn to dollars in times of political and economic uncertainty.
The dollar’s trading day began in Tokyo, where the currency fell to 149.68 Japanese yen at the close from 150.00 yen Wednesday. Later in London, it rose to 149.80 yen. In late New York trading, the dollar was quoted at 149.805 yen, down from 149.90 yen late Wednesday.
The dollar strengthened against the British pound in New York trading after weakening in London. A pound fetched $1.8680 late in New York, compared to $1.86885 late Wednesday. In London, sterling rose to $1.8720 from $1.8660 late Wednesday.
