Stocks Hover as Investors Stay Cautious

Market Overview

Highlights of Thursday’s market activity, compiled from Times staff and wire reports:

* Long-term Treasury bond yields soared as investors grew concerned that lawmakers may undertake heavy-handed efforts to stimulate the economy. Short-term rates slid further, however.

* On Wall Street, stocks edged higher, but investors remained cautious after the turmoil of the past week. The Dow Jones industrial average inched up 2.68 points to 2,932.69. Smaller stocks again fared much better.

Stocks

Investors still appear frightened about the possibility of a new recession, analysts say. But rising expectations that the Federal Reserve will again ease short-term interest rates helped bolster stocks.

On the New York Stock Exchange, advancing issues topped losers 830 to 780, as volume continued to be heavy at 196.18 million shares, versus Wednesday’s 196.16 million.

In the NASDAQ market of smaller stocks, winners topped losers by a more convincing 990 to 702. The NASDAQ composite index jumped 4.21 points to 530.33, a strong 0.8% rise that far outshone the Dow’s small gain.

“The market is in a very jittery position,” said Robert Walberg, an analyst at MMS International. “It’s jumping on (economic) data releases and rumors about what Bush is doing (on the economy).”

Early in the session, traders became unnerved after the Labor Department reported jobless claims jumped by 39,000 during the week ending Nov. 9, up from the previous week’s mark of 454,000. A decline had been expected.

“The case for a double-dip recession gets better with every passing number and every passing day,” said one analyst. “And the market is reflecting those concerns.”

But that poor economic signal once again raised expectations that the Fed will be forced to cut interest rates. All year long, falling rates have pushed a growing number of investors into stocks, for lack of better alternatives.

Some analysts said buyers Thursday also may have been trying to get into the market in advance of what often is a bullish move around Thanksgiving. “Normally, the days around Thanksgiving are humdingers,” said Jack Solomon, analyst at Bear Stearns.

Among the market highlights:

* Some of the industrial, transportation and technology stocks that have been battered lately on recession fears rebounded slightly.

GM rose 1/2 to 31 1/8, and Chrysler gained 1/2 to 12 on rumors that the White House will propose a tax incentive for people who buy domestic cars. The rumors were denied. Among other transport issues, Conrail rose 1 1/4 to 74 1/4, Norfolk Southern added 1 to 59, and USAir rose 1/2 to 10 3/8.

Among tech issues, System Software jumped 2 to 25 1/2, Logicon rose 1 3/4 to 38 5/8, Advanced Logic added 1/2 to 9 1/2, and PictureTel soared 3 to 40 1/2. Also, Dell Computer rose 1 3/8 to 23 1/4. It reported a third-quarter profit of 52 cents a share against 34 cents a year ago.

* Coca-Cola surged 2 1/4 to 68 3/4, bolstering the Dow index. The firm gave a bullish presentation to analysts on Wednesday. Arch-rival Pepsico added 5/8 to 29 3/8.

* Phone companies gained. The FCC on Thursday scrapped a requirement that the regional Bell firms maintain separate subsidiaries to provide basic phone service and such upgraded offerings as electronic mail and computer access. Nynex rose 7/8 to 76, Southwestern Bell added 3/4 to 59 3/8, and Pacific Telesis inched up 1/8 to 41 1/4.

* California bank and S&L; stocks continued to sink on worries about the state economy. Ahmanson slid 5/8 to 13 3/4, Downey Savings fell 3/4 to 12, Glenfed lost 3/8 to 4, Wells Fargo plunged 3 1/8 to 58 3/4, and First Interstate dropped 2 to 28 3/4.

* Energy giant Coastal Corp. tumbled 2 3/8 to 27 1/2. Several analysts cut their ratings after a meeting with the company. Coastal said its oil refining and marketing businesses have been under pressure in 1991.

* Global Yield Fund dropped 7/8 to 7 3/4 after the closed-end mutual fund, which invests in foreign bonds, omitted its dividend for the fourth quarter. The firm said the omission stemmed from currency losses that the IRS requires the fund to recognize. However, the fund indicated there were no problems with the quality of its bonds.

* Handleman Co. dropped 2 5/8 to 13 3/8. Donaldson, Lufkin & Jenrette cut its rating and 1993 estimate on the record and book distributor.

Overseas, shares closed lower on London’s exchange as investors remained cautious after several steep declines. The Financial Times 100-share average ended the day down 9.1 points at 2,463.5.

In Frankfurt, shares ended a dull session mixed. The DAX index fell just 0.95 point to 1,598.10.

In Tokyo, stocks extended their losing streak to seven days, but futures-linked buying and light bargain-hunting pulled the market up from its lows. The Nikkei average fell 22.02 points to 23,177.84.

Credit

Still feeling the sting of last week’s Senate proposal to cap credit-card interest rates at 14%, long-term bond investors grew jittery amid rumors that the Bush Administration was about to propose a tax incentive for people who buy domestic cars. The rumors were later denied.

The price of the Treasury’s bellwether 30-year bond fell 27/32 point, or $8.44 per $1,000 in face amount. Its yield, which rises when prices fall, shot up to 7.97% from 7.90% Wednesday.

Owners of long-term bonds are showing that they fear renewed inflation if the government tries too hard to pump up the economy, analysts said. Also, increased government spending or tax cuts could swell the federal deficit and boost the supply of Treasury bonds.

While yields on long-term bonds rose, however, yields on shorter-term bills and notes continued to sink on the expectation that the Federal Reserve will have to cut short-term rates again to help the economy.

Rumors that Japanese investors were selling their holdings of zero-coupon Treasury “strips” also put downward pressure on long-term bond prices, economists said. Strips are bonds that have been split from their interest payments and are bought by investors hoping to gain from price increases.

The federal funds rate, the interest on overnight loans between banks, held at 4.625%.

Currency

The dollar was mixed against most major currencies

It fell in response to the Labor Department’s jobless claims report, which raised the possibility of lower interest rates.

But the dollar regained some ground in late trading.

In New York, the dollar closed at 1.599 German marks, down from Wednesday’s 1.600 marks and fell to 129.60 Japanese yen from 129.80 yen Wednesday.

Commodities

Gold futures prices reached a four-month high in heavy trading, partly on fears that election-year efforts to jump-start the economy will ignite consumer inflation.

Gold for December delivery rose $3.90 on New York’s Commodity Exchange to settle at $368.20 an ounce, the highest settlement of a near-term contract since July 23.

December silver deliveries rose 4.3 cents to $4.125 an ounce on the Commodity Exchange.

At the same time, oil prices fell late in the session on the New York Merc, wiping away earlier gains as traders began selling crude on rumors that Iraq may get back into the market. Light, sweet crude oil for January delivery fell 21 cents to $21.78 a barrel.