Stocks Respond to Economic Gains : Market Overview
* The stock market chalked up its third straight gain, encouraged by more signs of a strengthening economy. The Dow Jones industrials climbed 15.94 points to 3,282.20 in an abbreviated session.
* Treasury bond yields jumped after the government reported an unexpected rise in the nation’s personal income and spending. But traders said thin trading made the rate rise suspect.
* New York oil futures markets remained closed for the long Thanksgiving holiday weekend, delaying until Monday any market reaction to OPEC’s announcement of a new crude oil production ceiling.
Stocks
Broader market indexes extended their record-setting gains, with the NASDAQ composite index, Standard & Poor’s 500, the NYSE composite and the Wilshire 5,000 all reaching new highs.
Advancing issues outnumbered declines by about 7 to 5 on the New York Stock Exchange. Volume was only 106.1 million shares, the lowest since the 124.4 million recorded on Sept. 4, the Friday before the Labor Day holiday weekend.
The markets ended their trading day two hours early, at 11 a.m. PST, with many investors taking a long holiday weekend.
But even in their absence, analysts said stocks continued to benefit from recent signs of a strengthening economy.
The Commerce Department reported that personal income and spending both rose sharply in October. Earlier in the week, the government’s revised figures on economic growth for the third quarter showed a much greater gain than what most analysts had expected.
Also encouraging investors Friday was news that the Christmas retail season got off to a good start.
For the week, the Dow industrials gained a net 54.84 points.
Among Friday’s highlights:
* The upbeat economic data inspired buying of stocks in basic industries, including forest products, metals and chemicals. Those industries’ fortunes are closely linked to the ups and downs of the business cycle.
Among the paper and forest-products issues, International Paper rose 1 5/8 to 64 5/8; Georgia-Pacific 1 1/2 to 60; Louisiana-Pacific 1 1/8 to 58 1/4, and Weyerhaeuser 1 to 39.
In the metals sector, Phelps Dodge gained 1 1/4 to 46 5/8; Reynolds Metals 2 to 52 1/8; Inco 7/8 to 21 3/8, and Timken 5/8 to 27 5/8.
Among chemicals, DuPont added 1 to 47 5/8; Great Lakes 1 7/8 to 67 1/2, and Union Carbide 3/8 to 15 7/8.
* Retailers inched higher on signs of better consumer spending. Toys R Us gained 1/2 to 39 1/2, Price Co. 1/2 to 40 1/8 and J. C. Penney 3/8 to 79 7/8.
* Comptronix led the active list in the NASDAQ market, up 2 1/4 at 8 3/8 after plunging 15 7/8 on Wednesday, when financial irregularities were disclosed.
* Eagle Hardware lost 3 to 31 1/2. Traders cited profit taking after a sharp run-up in the stock.
Overseas, London’s market hit a record close for the second consecutive day, buoyed by renewed strength in futures and firmer trading on Wall Street. The Financial Times 100 index closed at 2,760.1, up 18.3 points on the day. It closed at 2,732.4 a week ago.
But the gloom continued in Frankfurt, where the DAX index ended 0.23 points lower at 1,522.95. It was at 1,544.76 a week ago.
In Tokyo, the Nikkei average slipped 8.43 points to 17,470.61. Its big rally during the week lifted it from last Friday’s 17,033.60.
In Mexico City, the Bolsa index jumped 23.74 points to 1,727.23, its seventh consecutive advance.
Credit
The yield on the Treasury’s 30-year bond jumped to 7.59% from 7.54% Wednesday on indications of a stronger economy.
Healthy third-quarter indicators suggest “that strength is likely to continue into the fourth quarter,” said Ram Bhagavatula, chief financial economist at Citicorp Securities Markets Inc.
Bullish economic figures usually send bond yields up because they are a signal to bond traders that inflation, which erodes the value of long-term investments, might heat up. They also make it less likely that the Federal Reserve will lower interest rates and bolster the principal value of bond investments.
But the thinness of Friday’s post-holiday trading made for volatile prices that did not necessarily indicate long-term market trends, Bhagavatula said.
The federal funds rate, the interest on overnight loans between banks, rose to 3 3/8%, up from 3 1/4% late Wednesday.
Currency
The dollar found some support in the stronger than expected U.S. personal income and spending figures.
The dollar was at 1.5985 marks in late New York trade, up from 1.5880 on Wednesday.
In Tokyo, the dollar closed at 124.20 yen, up from 123.60 yen on Thursday. Later in London, it rose to 124.40 yen. In late trading in New York, the dollar was at 124.45 yen, up from 123.72 yen on Wednesday.
In London, the British pound softened to $1.5090 from $1.5249 Wednesday. It edged higher to $1.5105 in New York.
In New York, the dollar firmed to 1.2865 Canadian dollars from 1.12853 on Wednesday.
Other late dollar rates in New York, compared with late Wednesday rates, included 1.4400 Swiss francs, up from 1.4270; 5.4275 French francs, up from 5.3820; and 1,394 Italian lira, up from 1,375.
Commodities
Traders said crude oil prices on the New York Mercantile Exchange should trade near unchanged on the OPEC action, which set an output ceiling of 24.582 million barrels per day.
In London Friday, January Brent crude futures rose 22 cents to $18.97 per barrel.
Gold prices ended higher. On the Commodity Exchange, gold bullion for current delivery settled at $333.90 an ounce, up 40 cents from Wednesday. A late quote from the Republic National Bank said gold closed up 75 cents at $334.60.
