Treasury Yields Soar; Market Bides Its Time : Market Overview
* Treasury bond yields soared as the government reported that unemployment in October nosed down a bit. The yield on the Treasury’s main 30-year bond was 7.76%, up from 7.69% late Thursday.
* Stocks showed little movement, with the market biding its time as traders studied new signs of a gradually strengthening economy.
* The dollar continued its advance on world currency markets, boosted by higher interest rates.
Credit
Bond market analysts said the jobs data fed speculation that the Federal Reserve will not lower interest rates soon.
The Labor Department said the jobless rate slipped to 7.4% in October, its lowest level in six months, even though only a smattering of jobs were created.
The key 30-year bond’s price, which falls when the yield rises, was off 25/32 point, or about $7.81 per $1,000 in face amount.
The government said the decline in unemployment occurred because teen-agers returned to school, shrinking the size of the labor force.
On Monday, the Treasury Department will hold its quarterly refunding auctions in which it will sell $37 billion in securities to refund the nation’s debt.
The bond market has also been concerned that President-elect Bill Clinton will increase government spending in order to jump-start the economy. That could mean a higher deficit, necessitating the sale of more Treasury securities, which would lower their value while raising their yields.
The federal funds rate, the interest on overnight loans between banks, was 2.813%, down from 2.875% late Thursday.
Stocks
Analysts said the Labor Department’s unemployment report helped to bolster hopes on Wall Street that the economy is gathering momentum.
But enthusiasm over the news among stock traders was muted by the accompanying rise in open-market interest rates.
The Dow Jones average dropped 3.78 points to 3,240.06, trimming its gain for the week to 13.78 points. In the broader market, advancing issues held a narrow edge on declines on the New York Stock Exchange. Big Board volume retreated to 205.31 million shares from 219.73 million on Thursday.
On the NYSE, profit taking was a big feature after a strong rise of nearly 21 points on Thursday. Slumping bond prices were the spur.
Analysts said the market has plenty of room to accelerate once the consolidation is over.
Among the market highlights:
* American Telephone & Telegraph was actively traded, up 1/2 to 44 7/8. Analysts believe that the company stands to gain new competitive muscle through the acquisition of a stake in McCaw Cellular Communications.
* Among other actively traded blue chips, International Business Machines finished with a 3/8 gain to 66 1/4 after touching a new 10-year low. General Motors dropped 5/8 to 30 5/8, and Philip Morris fell 5/8 to 78.
* Food Lion class A stock fell 1 to 8 1/4 and its Class B shares dropped 1 3/8 to 8 5/8 as the two most-active issues in the NASDAQ market. Food Lion vehemently disputed an ABC News report that accused the grocery retailer of unsavory sanitation practices.
* Tyson Foods rose 1 to 21 7/8 on news that chicken prices are expected to rise this year. Hudson Foods Inc. rose 1/2 to 11 1/2 on the same news.
* Price Co., another NASDAQ issue, jumped 6 1/2 to 43 3/4 on rumors that the operator of warehouse-club retail outlets was about to be taken over.
* Marvel Entertainment Group touched a new high in Big Board activity, adding 2 1/8 to 41. The company declared a 2-for-1 stock split.
* Merck dipped 1/8 to 42 1/8 after Chairman Roy Vagelos said sales of Proscar won’t top $1 billion in two years, as some analysts had expected. Proscar is used to treat enlarged prostates.
* Cedar Fair gained 3/4 to 24 1/2, also making the new-high list. Third-quarter profit came to $2.34 per partnership unit, up from $1.91 a unit in the corresponding period last year.
* Pacificorp fell 1 to 19 1/8 on top of a 1 7/8-point loss Thursday. This week, the company posted an unexpected 41% earnings decline for the third quarter.
* Microsoft Corp. rose 7/8 to 92 3/4, and Apple Computer gained 3/4 to 55 3/4. Biogen Inc. rose 2 3/4 to 42 1/4, and Chiron Corp. surged 4 3/8 to 52 7/8.
Meanwhile, overseas, Japan’s 225-share Nikkei average finished down 161.78 points at 16,869.81. Frankfurt’s 30-share DAX average climbed 6.23 points to 1,487.16, and in London, the Financial Times 100-share average dropped 8.4 points to 2,702.7.
Currency
The dollar posted gains in Europe and continued to advance when trading shifted to domestic markets, ending near the highs for the week. Trading was quiet, dealers said.
Traders said they were closely monitoring developments in the bond market.
In New York, the dollar closed at 123.40 Japanese yen and 1.597 German marks, up from Thursday’s 122.85 yen and 1.581 marks, respectively.
Commodities
Soybean futures were higher on the Chicago Board of Trade, boosted by efforts to avoid a trade war between the United States and the European Community.
Elsewhere, crude oil futures fell 34 cents to $20.30 a barrel on the New York Mercantile Exchange.
Precious metal futures were lower in trading on New York’s Commodity Exchange, with gold closing down 50 cents at $335.70 an ounce. December silver was 5.5 cents lower at $3.88 an ounce.
Market Roundup, D6
