Broad Market Outpaces the Sluggish Dow : Market Overview

Blue chip stocks, weighed down by losses in IBM and General Motors, posted small gains, but the broader market extended its strong advance for a second day.

The Dow Jones industrial average rose 2.16 points to end at 3,209.53. But in the broad market, advancing issues led decliners 953 to 798 on the New York Stock Exchange.

The NASDAQ composite index rose 3.73 points to close at 638.59, buoyed by technology stock gains, including a stellar debut in new software issue Peoplesoft Inc.

Peoplesoft, initially priced at $17 a share, ended at 28 7/8 on turnover of more than 4.7 million shares.

“One of the things helping today was the unbelievable action in Peoplesoft,” said Charles Howley at Soundview Financial.

But some investors were cautious, waiting for further details on President-elect Bill Clinton’s plans to revive the economy.

“I think it’s a continuation of this watching and waiting for the Clinton act to see which way the cat is going to jump,” said Gene Jay Seagle, director of technical research at Gruntal & Co.

There was also caution on the economic front as new reports showed the number of Americans lining up for weekly unemployment benefits jumped early this month and construction of new homes slipped in October.

* Treasury bond yields rose on fears that the signals of a weakened economy could encourage Clinton to propose an economic stimulus package that could spur inflation. The yield on the Treasury’s main 30-year bond was 7.55%, up from 7.50% late Wednesday.

Credit

Bond prices began to fall in overseas trading Wednesday evening after Federal Reserve Chairman Alan Greenspan said the nation’s credit crunch is not worsening. The bond market took this as a signal that Greenspan believes that the economy is improving.

Bonds continued their retreat despite the two negative reports on the state of the economy.

The Labor Department reported that new applications for unemployment claims shot up by 31,000 to 386,000 for the week ended Nov. 7. It was the biggest increase in three months and the highest level of claims in six weeks.

And a Commerce Department report said housing starts fell 1.1% to a seasonally adjusted annual rate of 1.23 million last month after rising in August and September.

The two reports normally would have been negative for bond yields, said William Sullivan, director of money market research at Dean Witter Reynolds. “But in this politically charged atmosphere, people regard weak economic data as supporting fiscal stimulus early in Clinton’s term.”

Bond traders fear a large fiscal stimulus package because it could increase the nation’s deficit, prove inflationary and erode the value of long-term bond investments.

The price of the 30-year bond, which falls when yields rise, was down 17/32 point, or $5.31 per $1,000 in face amount.

The federal funds rate, the interest on overnight loans between banks, rose to 3.125%, up from 2.750% late Wednesday.

Stocks

As the trading day began, investors were confronted with the weekly jobless and new housing reports.

The Dow, after spending the whole session in a 15-point range on both sides of Wednesday’s close, finished with a 2.16-point gain.

In the broader market, advancing issues outnumbered those declining by about 6 to 5. New York Stock Exchange volume of 219.30 million shares was almost unchanged from Wednesday.

Among the market highlights:

* IBM lost 1 3/4 to 61 3/8, and GM fell 3/8 to 30 1/2.

* Enron Corp. fell 1 1/8 to 47 1/8 in active trading. The company said General Motors’ Electronic Data Systems unit sold a 3.5-million-share block of Enron stock at 47.

* Dell Computer, traded in the NASDAQ market, rose 2 1/8 to 38 3/8. The company reported sharply higher third-quarter earnings.

* The day marked the debut of a second hot new NASDAQ issue besides Peoplesoft. LanOptics, an Israeli technology company, climbed to 18 after an initial public offering of $13.50.

* Gainers among the blue chips that make up the Dow included Philip Morris, up 5/8 to 80 7/8; American Telephone & Telegraph, up 1/8 to 47; McDonald’s, up 7/8 to 48 3/4; Procter & Gamble, up 5/8 to 54 5/8, and Walt Disney, up 5/8 to 40 7/8.

The AT&T; shares touched a new high since the breakup of the old Bell System almost nine years ago.

* Campbell Soup climbed 1 5/8 to 43 1/2, also a new high.

In overseas trading, Tokyo stocks pushed their technical rally into a second day. The Nikkei 225-share average finished up 92.47 points to 16,871.31.

Shares closed moderately higher in Frankfurt. The 30-share DAX average ended 6.60 points higher at 1,551.65.

London’s Financial Times 100-share average closed 2.2 points higher at 2706.2.

Currency

The dollar lost ground against most other leading currencies for the third consecutive session, pushed down by the negative U.S. economic reports.

Frank Pusateri, vice president for foreign exchange at the Bank of Boston, said the dollar’s initial move in the wake of the reports was to move sharply higher, the opposite direction that would be expected on signs of economic weakness.

But Pusateri said the dollar rally soon ran out of steam, and the currency retreated to test recent lows.

He said the dollar has been recently trading in a range of between 1.57 German marks and 1.60 marks. It ended Thursday at 1.572 marks, down from 1.590 marks the day before. In New York, the dollar fell to 123.45 Japanese yen from 123.70 yen late Wednesday.

Commodities

Oil prices rose sharply on rumors that OPEC would consider cutting back output when it meets next week.

December crude oil closed 35 cents higher at $20.54 a barrel on the New York Mercantile Exchange.

Meanwhile, gold edged up 20 cents to $335.30 an ounce in light trading on New York’s Commodity Exchange. Silver ended unchanged at $3.763 an ounce.

Market Roundup, D6