Dow Edges Up 0.81; Bond Yields Dip
Stock prices struggled to a small gain as investors kept a cautious eye on the political news and the bond market.
* Treasury bond yields dipped once the government’s quarterly refunding auction began.
Stocks
The Dow Jones average edged up 0.81 to 3,240.87.
In the broader market, advancing issues outnumbered those declining by about 8 to 7 on the New York Stock Exchange. Big Board volume came to 197.56 million, down from Friday’s 205.31 million.
The NASDAQ index retained a strong gain of 5.23 points to close at 622.05, buoyed by a rally in biotechnology stocks.
Analysts said the market continued to recoup some of its losses in September and early October while waiting for President-elect Bill Clinton’s economic advisory team and policy plans to take shape.
The economy has shown signs of gathering momentum in the last month or two, notably in the persistently weak job market. But that evidence of strength has helped push interest rates higher in the credit markets.
The Street’s Federal Reserve-watchers now believe that there isn’t much likelihood of further moves by the Fed to ease credit conditions anytime soon.
The Dow was up more than 20 points early in the day, but a selloff in blue chip stocks was ignited by Clinton’s remarks to reporters that he sees “a lot of very troubling signs in the economy.”
Clinton aides announced over the weekend that the President-elect plans a summit in Little Rock, Ark., of business, government and economic leaders to discuss the economy and try to determine what the problems are and identify solutions.
“They’re (Clinton planners) trying to downplay expectations,” said John Blair, head trader at County NatWest.
The new President faces not only a ballooning budget deficit but also a looming trade war over European Community oil seed subsidies, which Washington wants to be cut along with other farm support.
Analysts said investors were also keeping an eye on this week’s Treasury refunding of more than $37 billion. The first leg of the refunding, on Monday, was as expected.
“The big news this week is the refunding,” said A. C. Moore, an analyst at Argus Investment Management. He said outside of that, the stock market is looking vulnerable to a correction.
Among the market highlights:
* Storage Technology topped the actives list on the NYSE, losing 8 1/4 to 23 1/2 after it announced another delay in its Iceberg disk array product. Testing of Iceberg will now extend into the second half of 1993.
* National Education Corp. fell 1 1/2 to 5 1/4. The company, in reporting slightly higher third-quarter earnings, cited a continuing shortfall in revenue at its Training Group.
* Checkers Drive-In Restaurants, traded in the NASDAQ market, dropped 1 to 23 1/4. A Barron’s magazine article suggested that the stock was overpriced.
* Medco Containment Services, one of the most active NASDAQ issues, rose 1 3/8 to 33 5/8, while Diagnostek Inc. plunged 6 7/8 to 9. Medco said it was re-evaluating its planned acquisition of Diagnostek.
* Gainers among the blue chips that make up the Dow included International Business Machines, up 1 1/4 to 67 1/2; Walt Disney, up 3/4 to 40 7/8; Exxon, up 1/4 to 58 1/2, and General Motors, up 1/4 to 30 7/8.
* Philip Morris, by contrast, dropped 1 to 77, and American Telephone & Telegraph was down 1/8 to 44 3/4.
* Mortgage and consumer-finance stocks generally had a good day. Federal National Mortgage, up 3/4 to 72 1/2; Federal Home Loan Mortgage, up 5/8 to 46 3/8; CMAC Investment, up 3/8 to 20 3/4; Mercury Finance, up 7/8 to 14 1/2, and First USA, up 3/4 to 15 7/8, all made the list of new highs for at least the last 52 weeks.
* Price Co. fell 2 1/4 to 41 1/2 in NASDAQ trading. The stock had climbed 6 1/2 points Friday on takeover rumors and speculation that were not borne out by any news through late Monday.
Overseas, stocks ended sharply lower in Tokyo on a weaker futures market and small-lot selling. The 225-share Nikkei average closed down 452.76 points to 16,417.05.
Frankfurt’s 30-share DAX average surged 21.64 points to close at 1,508.80.
Shares closed lower on the London stock exchange, with the Financial Times 100-share average losing 7.3 points to close at 2,695.4.
Credit
The yield on the Treasury’s main 30-year bond was 7.73%, down from 7.76% late Friday. Its price, which moves inversely to its yield, closed up 1/4 point, or $2.50 per $1,000 in face amount.
Larry Wipf, director of regional economics at the Norwest Corp. in Minneapolis, said Monday’s driving force was the first of the refunding auctions. These auctions are held four times a year to replenish government coffers drained by huge deficits.
He said the market was down until the auctions began, and then there was a moderate recovery.
In the auction, the average yield for three-year notes rose to the highest level in six months.
Although Wipf said he believed that the market was pausing a bit, it will “continue to be nervous concerning what type of economic stimulus package is enacted next year.”
Nancy Kimelman, chief economist at Technical Data, a unit of Thomson Financial, also said the auction was “the overriding concern of the market.”
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
The federal funds rate, the interest on overnight loans between banks, fell to 3% from 3.125% late Friday.
Currency
The dollar settled mostly higher in choppy dealings on world currency markets.
The dollar ended mixed in Europe and initially declined when trading shifted to domestic markets. Dealers were intent on taking profit after the currency’s rise over the last few weeks.
But the dollar ultimately rose because of developments surrounding other currencies.
Separately, the Japanese yen came under pressure after a steep decline in stock prices on the leading Tokyo exchange. In New York, the greenback closed at 124.25 Japanese yen, up from 123.40 yen.
Traders cited growing pessimism over Japan’s political turmoil, widely expected to delay government measures to boost the economy.
The dollar rose to 1.600 German marks in New York, up from Friday’s 1.597 marks. The British pound fell to $1.512 from Friday’s $1.530.
Commodities
Silver and platinum futures gave up most of last week’s sharp gains amid fading expectations that President-elect Clinton will move quickly to stimulate the economy.
On other commodity markets, energy futures rose strongly; livestock and meat futures gained, and grains and soybeans were mixed.
Silver for December delivery plunged 17.8 cents on New York’s Commodity Exchange to $3.702 an ounce. December gold slid $3.10 to $332.60 an ounce. January platinum tumbled $6.40 to $357.80 an ounce on the New York Mercantile Exchange.
Meanwhile, crude oil futures rose 32 cents to $20.62 a barrel on the New York Mercantile Exchange.
Market Roundup, D8
