Rosy News on Inflation Sends Dow Up 5.59 : Market Overview
Stocks moved into record territory with modest gains as good news about inflation fired up speculation that the Federal Reserve will further cut interest rates to lift the economy out of recession.
The dollar soared against the German mark and gained against other currencies on a report that the major industrialized nations want a stronger U.S. currency.
Heavy buying of gold futures in early trading set off a technical rally that overwhelmed the influence of a stronger dollar and gave a sharp boost to precious metals in general.
Stocks
The Dow Jones average of 30 industrials rose 5.59 points to 3,209.53, surpassing the closing peak of 3,204.83 it reached two days before.
Gainers outpaced losers by 9 to 7 in active New York Stock Exchange trading. Big Board volume came to 292.35 million shares, up slightly from Wednesday’s 289.75 million.
The Labor Department said wholesale prices fell 0.2% last month and 0.1% for all of 1991. It was the first full-year decline for the producer price index since 1986, when prices fell 2.3%, and it followed a rise of 5.7% in 1990.
There was speculation that the Fed may trim rates further if the December jobs report due today shows unemployment rising to 7% or more from 6.8% in November.
Analysts said retail and institutional investors poured more cash into stocks, with some favoring secondary issues. The NASDAQ composite index of over-the-counter stocks hit its 10th straight record close, rising 9.48 points to 619.80.
Profit takers were active all day, but investors were eager to buy on any dips.
Among the market highlights:
* J. P. Morgan closed down 2 1/2 to 67 1/2 after the bank said its fourth-quarter profit rose more than 40%.
* Woolworth rose 2 3/8 to 31 3/8 as investors cheered the retailer’s announcement Wednesday that it will close or revamp 900 of its stores.
* Walt Disney gained 5 1/2 to 128. Chairman Michael Eisner said in the company’s annual report that he expects fiscal 1992 results to be “superior” to 1991.
* Hewlett-Packard rose 2 1/4 to 60, while Sun Microsystems, traded in the over-the-counter market’s NASDAQ system, gained 1/8 to 28 7/8. Hewlett-Packard plans to introduce a workstation to compete in a market dominated by Sun.
* Other blue chip gainers included Philip Morris, up 3/4 at 80 7/8; McDonald’s, up 1 3/4 at 42 7/8, and Glaxo Holdings, up 1 1/4 at 34 7/8.
Gold-mining issues advanced broadly as the price of gold for January delivery rallied $6 an ounce to $356.60 on the New York Commodity Exchange.
Tokyo stocks closed sharply higher in thin, volatile trading. The 225-share Nikkei average was up 398.64 points to 23,113.64.
Share prices closed sharply higher in London. The 100-share Financial Times index jumped 30.8 points to 2,497.9. Sentiment on the Frankfurt bourse also took a turn for the better, with the 30-share DAX average ending 11.03 points higher at 1,589.76.
Credit
Government bond prices closed narrowly mixed, buffeted by rumors of increased job growth and reports of tame inflation and a shrinking supply of money in the economy.
Corporations flooded credit markets with nearly $3 billion in long-term debt, continuing a scramble to save on lower interest rates. Four days of feverish selling brought the week’s total to $11.38 billion, easily surpassing the previous single-week record of $7.75 billion in April, 1986.
The price of the Treasury’s bellwether 30-year bond slipped 1/32 point, or 32 cents per $1,000 in face amount. Its yield was 7.41%, up from 7.39% Wednesday.
Elliott Platt, research director of Donaldson, Lufkin & Jenrette Securities Corp., said government bonds declined sharply on a rumor that the December employment report will show a gain in jobs.
The market became “very skittish” on the rumor, Platt said, with traders selling government securities to cover speculative positions. A rise in employment would be a sign of recovery--bad news for the bond market because the Federal Reserve would be less inclined to lower interest rates.
The federal funds rate, the interest on overnight loans between banks, was at 4.25%, up from Wednesday’s 4%.
Currency
Aggressions in the Ukraine, unemployment fears in Germany and job optimism in the United States helped support the dollar, which fell the previous day on concerns over President Bush’s collapse in Tokyo.
Traders said the dollar began gaining ground after a Tokyo newspaper reported that the Group of Seven industrialized nations will discuss a stronger dollar at their meeting Jan. 25. That pushed the mark up more than 2 pfennigs. The report was unconfirmed.
The dollar continued to climb as the Dutch central bank slightly eased its monetary policy. Bob Near, a vice president of currency trading at Bank of New York, said the move stirred excitement that the German central bank might move to lower interest rates.
“Because they’re in lock step with Bundesbank, it was sort of envisioned this could be foreshadowing a wave of European eases,” Near said.
The dollar settled in New York at 1.559 marks, up 5 pfennigs from Wednesday’s close of 1.509.
It rose to 125.85 Japanese yen from 124.45. The British pound fell to $1.816 from $1.877.
Commodities
The gold rally on New York’s Commodity Exchange resulted from the oversold condition of the market, said Peter Cardillo, director of research at Westfalia Investments in New York.
On other markets, grains and soybeans were lower, frozen concentrated orange juice was higher, livestock and pork futures gained, and energy futures were mixed.
The dollar strengthened in foreign exchange trading, a development that usually weakens precious metals prices.
But gold futures for delivery in February settled $6 higher at $356.60 an ounce, and March silver was 18.3 cents higher at $4.153 an ounce.
Energy futures were mixed on the New York Mercantile Exchange. Light, sweet crude for delivery in February was 1 cent lower at $17.86 a barrel.
Market Roundup, D8
