Dow Rises 5.04; Overseas, There’s Selling : Market Overview

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

* Stock prices were mixed in one of the laziest sessions of the year, as traders found few insights on the economy and kept a close eye on the bond market. The Dow Jones average of 30 industrials edged up 5.04 points to 3,337.58, but in the broader market, declining issues led advances 7 to 6 on the New York Stock Exchange.

* Foreign markets took a drubbing. Tokyo stocks closed at a six-year low, London stocks at an 18-month low and Frankfurt stocks at a seven-month low.

* Treasury bond prices rose in quiet trading on hopes that the Federal Reserve will take additional steps to lower interest rates and in response to an overnight plunge in Japanese stocks.

Stocks

Volume on the Big Board was the second lightest of the year--142.45 million shares.

That was a huge drop from Friday, when 188.34 million shares changed hands. The quietest session of 1992 was March 20, when volume came to 134.17 million.

There were no major economic reports released during Monday’s session to drive trading in either direction.

Instead, analysts were examining developments in the bond market after last week’s strong rally, said Steven Van Brunt, assistant vice president for equity trading at Nikko Securities Co. International.

Bond prices soared and yields fell Friday after release of the July employment report, which showed that the jobless rate fell slightly to 7.7% but that there was little growth in the economy.

A strong bond market makes stock analysts nervous about the possibility that investors will shift cash from stocks to bonds.

Surprisingly, analysts said that weakness in overseas markets had little effect on U.S. markets.

In Tokyo, the 225-share Nikkei average plunged 451.93 points to 15,066.34--or 2.91%--after dropping below the psychologically important 15,000 level during the day. It was the Nikkei’s lowest close since April, 1986.

In London, the Financial Times 100-stock index fell 24.4 points to an 18-month low of 2,325.7 as investors worried about the recovery and the strength of the pound.

Concern about high German interest rates and the weak dollar pushed Frankfurt’s 30-share DAX average down 26.95 points to 1,582.55, its lowest close since January.

Market highlights:

* Navistar International, which fell 1/8 to 2 1/8, was among the most actively traded issues. The Chicago-based truck maker has riled union members with plans to slash health insurance benefits, and workers said they will picket a meeting of management today.

* St. Louis-based McDonnell Douglas gained 2 1/4 to 37 5/8 after unveiling a broad restructuring. The nation’s leading defense contractor said it plans to consolidate its six government aerospace companies into two, seek a partner or buyer for its helicopter company and close a Columbus, Ohio, plant.

* The most actively traded NYSE issues were Texas Utilities, up 1/4 to 42 3/4, and NationsBank, down 1/2 to 45 1/4. Both had block trades of 3 million shares late in the session.

* Technology issues were mixed. Storage Technology plummeted 6 1/8 to 27 1/4, a decline of 18%. The computer memory manufacturer said last week that it was delaying introduction of a new product.

Hewlett Packard rose 1 5/8 to 60 1/2. Its stock dropped 12 5/8 to 58 7/8 Friday after it said that third-quarter earnings would fall below analysts’ expectations.

Other technology issues that fell were Kyocera, down 1 1/2 to 54 1/4, and Matsushita, down 1 1/2 to 93 1/2. But International Business Machines climbed 1 3/8 to 88 1/2.

* Among widely held issues, Coca-Cola gained 1/2 to 43 1/8, Citicorp dropped 3/4 to 18 7/8, and General Motors rose 7/8 to 37 7/8.

Credit

The price of the 30-year Treasury bond rose 3/8 point, or $3.75 per $1,000 in face amount. Its yield, which falls when prices rise, was 7.36%, down from 7.39% Friday.

Traders who bought bonds Monday reasoned that Friday’s weak employment numbers might prod the Fed to lower the federal funds rate, the interest rate banks pay each other on overnight loans, to try to stimulate the recovery. The rate rose to 3 5/16% Monday from 3 1/8% Friday.

The Fed’s policy-making committee is scheduled to meet next Tuesday.

Steven A. Wood, an economist with BankAmerica Capital Markets group, said Treasuries also received impetus from traders concerned about Tokyo’s stock market plunge. Many of them decided to seek the safety of bonds, he said.

A lot of traders are staying away from the market ahead of the Treasury’s quarterly refunding auctions this week, said Ray Stone, managing director of Stone & McCarthy Research Associates Inc.

The Treasury is scheduled to sell $15 billion in three-year notes today, $11 billion in 10-year notes Wednesday and $10 billion in 30-year bonds Thursday.

Currency

The dollar was mixed in thin trading as investors watched to see if the Federal Reserve would intervene on the currency’s behalf.

The central bank entered the market at least three times Friday, buying dollars in an attempt to bolster the sagging greenback.

Stephen Flanagan, vice president at Mitsubishi Bank, said the market saw “a steady stream of (German) mark buying and dollar selling that will continue unless the Federal Reserve intervenes again.”

The dollar rose to 127.90 yen in New York from Friday’s 127.45. It fell to 1.4630 German marks from 1.4680. The British pound rose to $1.9315 from $1.9295.

Commodities

Orange juice futures plummeted on word that the Brazilian harvest has begun, meaning that shipments of Brazilian juice will begin arriving in the United States a month sooner than expected.

On other commodity markets, coffee futures fell sharply; precious metals were mixed; oil futures retreated; grains and soybeans were mixed, and livestock and meat futures were mixed.

The contract for September delivery of frozen concentrated orange juice plunged 8.75 cents to $1.083 a pound on the New York Cotton Exchange.

Orange production is expected to increase sharply this year

In precious metals markets, gold and silver futures were barely changed on New York’s Commodity Exchange, but platinum futures skidded on the New York Mercantile Exchange as political tensions continued to ease in South Africa, the world’s largest producer.

August gold rose .10 cent to $350.40 an ounce. September silver slipped 0.7 cent to $3.965 an ounce. October platinum tumbled $8.30 to $370.30 an ounce.

Light, sweet crude oil for September delivery fell 19 cents to $21.03 a barrel on the New York Mercantile Exchange.

Market Roundup, D8