Cyclical Stocks Bring Gains; Bond Yields Fall : Market Overview
* A continued wave of buying in cyclical stocks helped the stock market post modest gains in a busy session.
* Fresh government economic data with contradictory messages pushed long-term government bond yields lower.
* The dollar fell against most foreign currencies, with the exception of the Japanese yen.
Stocks
The Dow Jones average rose 3.79 points to 3,256.81 on top of Thursday’s 11.07 gain, finishing the week with a net loss of 14.31 points.
In the broader market, advancing issues outnumbered those declining by about 4 to 3 on New York Stock Exchange volume of 293.36 million shares, up from 257.62 million the day before.
Smaller-capitalized stocks were led further into record ground as gains in technology issues nudged the NASDAQ market to its third record closing high this week. The NASDAQ composite index finished up 0.86 points to 701.63.
“There hasn’t been anything to ruffle the market,” said Jack Solomon, a technical analyst at Bear Stearns. “This may be part of the honeymoon with (President) Clinton here.”
Auto, cyclical and technology stocks drew bids, and even some battered drug issues showed signs of revival--as did the economy.
The Commerce Department said construction starts on new homes and apartments climbed 5.5% to a seasonally adjusted annual rate of 1.302 million units in December.
Actual construction starts for all of 1992 jumped by 18.5%.
First-time applications for state unemployment benefits climbed by 17,000 to 361,000 in the first week of January, up from a revised 344,000 in the previous week, the Labor Department said.
Among the market highlights:
* Pfizer jumped 2 3/4 to 67 3/4 in a positive response to its fourth-quarter earnings. Mylan Labs added 1 1/8 to 33 1/8, and ICN Pharmaceutical rose 1 to 8 1/2.
* Auto stocks again advanced, with Chrysler up 1 3/8 to 39 5/8, General Motors ahead 3/8 to 37 7/8 and Ford up 3/4 to 48.
* Among other cyclical stocks, which traditionally are among the first to rise as the economy recovers, steel company USX rose 2 3/4 to 37 3/4, Bethlehem Steel added 1 3/4 to 19 1/4, and Inland Steel gained 7/8 to 24 1/8 amid hopes of price increases and on subsidy and dumping duties on some foreign steel makers.
* McDonnell Douglas surged 5 1/2 to 62 after an unexpectedly positive earnings forecast by the company, analysts said. Douglas Aircraft Co., the commercial jet unit of McDonnell Douglas, said it plans to cut about 21% of its work force this year.
* Amgen sank 1 7/8 to 66 1/4. S. G. Warburg cut its rating to sell from buy.
Overseas, buying prompted by technical factors and a growing conviction that German interest rates are headed lower pushed Frankfurt shares higher. The DAX 30-share average ended 13.97 points higher at 1,587.64. Tokyo stocks ended lower, with the 225-share Nikkei average 201.87 points down at 16,336.81. Prices rallied for the third consecutive session on the London stock exchange, with the Financial Times 100-share average index rising 7.9 points to 2,773.3.
Credit
Trading was erratic and uneven as investors tried to reconcile the contradictory messages from the housing starts and new jobless claims reports.
The key 30-year Treasury bond yield fell to 7.29% from 7.30% at Thursday’s close.
The long-bonds price gained 1/16 point, or 62.5 cents per $1,000 in face amount. Bond prices and yields move in opposite directions.
Carol Stone, senior economist at Nomura Securities International Inc., said the bond prices were generally firming on the weak employment numbers. The sluggish job market is yet another sign that the economy isn’t poised for a rapid surge in growth that could lead to inflation, which erodes the value of bonds.
“It adds to the overall positive effect on the market,” she said.
The federal funds rate, the interest on overnight loans between banks, was 2%, down from 2.938% late Thursday.
Other Markets
The dollar fell against all major currencies except the Japanese yen, which suffered from reports of an impending interest rate cut by Japan’s central bank.
The dollar closed in New York at 125.10 yen, up from 124.90 yen on Thursday. The dollar fell to 1.591 German marks, down from the previous day’s close of 1.614 marks.
In the commodities markets, precious metals futures on New York’s Commodity Exchange retreated. Gold futures fell 60 cents to $328.60 an ounce, and March silver fell 1.5 cents to $3.695 an ounce.
Energy futures prices edged up on the New York Mercantile Exchange, with light, sweet crude oil for delivery in March closing up 2 cents a barrel at $18.83.
Dow Jones Industrials
New York Volume, Los Angeles Times
Markets at a Glance
