Dow Shakes Off Early Slide, Rises 9.84 : Market Overview
* Blue chip stocks rebounded from a midday slump to close higher, though the broad market continued to show significant weakness. The Dow Jones industrials rose 9.84 points to 3,348.61.
* Bond yields ended mixed after a volatile session. Late reports of weaker-than-expected auto sales and an encouraging auction of five-year Treasury notes helped pull yields lower by the close.
Stocks
Stocks opened higher after the government reported that the number of first-time jobless claims had declined during the second week in April. A separate report said orders to U.S. factories for durable goods rose 1.6% in March.
The news encouraged investors who’ve been buying industrial stocks, betting on a genuine economic recovery.
But as trading progressed, stocks began to crumble, hurt by a sharp rise in bond yields that was fueled by the improved economic signals. The Dow quickly lost more than 20 points.
Late in the day, however, an uninspiring report on 10-day auto sales calmed the bond market, helping stocks resume their rally.
By the close, losers still outnumbered winners 853 to 823 on the Big Board in heavy trading of 237.94 million shares, up from 218.88 million Wednesday.
“The broad market came back but still was underwater,” said Larry Wachtel, analyst at Prudential Securities. That trend of strength in the Dow and weakness in most other stocks continues to worry many analysts, who fear that it’s a sign of a market top.
Among the market highlights:
* The Dow was helped by gains in a mix of industrial and consumer issues. Among industrials, Allied-Signal leaped 2 3/4 to 59 on a strong earnings report, Dupont rose 2 1/4 to 52, and Exxon added 1 1/4 to 59 1/4.
Among consumer issues, McDonald’s surged 1 3/8 to 42 3/8 after reporting higher quarterly earnings and a pickup in domestic sales. Also rising were Philip Morris, up 1 3/4 to 76 3/4, and Coca-Cola, up 1 1/8 to 82 3/8.
* Other industrial stocks gaining on economic optimism included copper producer Phelps Dodge, up 5 to 87 3/8; Illinois Tool Works, up 2 1/8 to 64 1/2; Deere, up 2 1/8 to 51 1/8, and USX-U.S. Steel, up 1/2 to 24 7/8. Auto stocks were also strong, with Ford up 1 3/8 to 44 1/8, though it wasn’t clear if investors had digested the report of weak auto sales.
* Transportation stocks jumped, rebounding from a recent selloff. Delta Air Lines rose 2 5/8 to 60 1/2; UAL, parent of United Airlines, gained 4 1/4 to 127, and railroad CSX leaped 3 to 63.
* Drug and biotech stocks suffered another selloff, after Johnson & Johnson reported first-quarter earnings of $1.39 a share. That was at the low end of analysts’ estimates, though still up 11% from a year ago. The stock slid 2 1/8 to 90 7/8.
Other drug losers included Merck, down 2 7/8 to 139 3/4; Schering-Plough, off 1 5/8 to 51 7/8; Amgen, down 2 to 53, and Alza, which tumbled 1 3/8 to 41 5/8.
* Among Southland issues, Teledyne slumped 1 3/8 to 21 5/8 after the Justice Department charged the defense contractor with falsifying tests on electronic parts for weapons. Teledyne declined comment on the charges.
Overseas, Tokyo stocks staged another attempt at a rebound, with the Nikkei average rising 562.93 points, or 3.3%, to 17,402.05.
Shares finished little changed in London. The Financial Times average was up 2 points at 2,609.8. In Frankfurt, the DAX average finished 0.86 of a point lower at 1,752.44.
Credit
Bond yields jumped in morning trading after encouraging economic reports fueled inflation fears.
But by the close, the price of the Treasury’s benchmark 30-year bond was off 3/16 of a point, or $1.88 per $1,000. Its yield inched up to 8.04% from 8.03% Wednesday.
Yields on most shorter-term bonds finished slightly lower.
Analysts said the market gained ground after a weak mid-April auto-sales report hit the news late in the day. Also, the Treasury’s sale of new five-year notes went well enough to encourage bond traders, who’ve been concerned about a heavy supply of new bonds in the market.
The Treasury sold $10.3 billion in notes at an average yield of 6.93%. Kenneth Kim, analyst at Stone & McCarthy Research Associates, said that despite weak demand, the fact the auction results weren’t worse boosted bonds.
The federal funds rate, the interest on overnight loans between banks, was 3.675%, the same as Wednesday.
Currency
The dollar closed mixed against major currencies despite the better-than-expected news about the U.S. economy.
Strong German money supply figures suggested that German interest rates would remain firm, dampening demand for the dollar, said Mike Faust, senior currency strategist at MMS International. The Bundesbank said money supply grew by 9.7% in March, above the 3.5% to 5.5% target.
In New York, the dollar was at 1.661 German marks, down from 1.662 Wednesday. It closed at 134.65 Japanese yen, up from 134.18.
Commodities
Wheat futures prices rose sharply amid hopes for accelerated Russian food aid and fears of further damage to the winter wheat crop.
Wheat for May delivery, which represents the last of the 1991 crop, rose 6.75 cents to $3.808 a bushel in Chicago. New-crop wheat rose as much as 8.25 cents a bushel.
Separately, crude oil ended flat on the New York Mercantile Exchange as OPEC oil ministers gathered in Vienna for a meeting. Light, sweet crude was unchanged at $20.11 a barrel.
Precious metals edged lower on New York’s Comex, with gold for current delivery slipping 60 cents to $338.70 an ounce and May silver falling 0.5 cent to $4.01.
