Dow Up 35.39 After Energy Stocks Rally : Market Overview

In a day of many cross-currents, blue chip stocks rolled up their sharpest gains so far in 1993 as long-term bond yields fell to new six-year lows. Yet the Dow industrial average’s gain of 35.39 points to 3,292.20 was largely thanks to a big rally in energy stocks, as oil prices spurted.

* The Treasury’s bellwether 30-year bond yield plunged to 7.19% from 7.29% Friday, a dramatic move that reflected investors’ increasing optimism about President Clinton’s deficit-reduction plans.

* Oil prices posted their biggest one-day jump in nearly 1 1/2 years--up 83 cents a barrel, to $19.66 for March crude futures on the New York Merc--as OPEC restarted talk of production cuts.

Stocks

Traders said stocks and bonds alike reacted explosively to Treasury Secretary Lloyd Bentsen’s comments Sunday about President Clinton’s plans for the economy.

Bentsen said Clinton wants a modest economic stimulus program while taking concrete steps to cut the federal budget deficit.

While his comments merely reinforced Clinton’s agenda, the Administration’s constant hammering on the deficit issue has apparently persuaded many investors that something will finally be done to restrain spending.

In the stock market, buying was across the board: Winners topped losers by 1,342 to 635 on the Big Board, in heavy trading of 288.74 million shares. Both the NYSE composite index and the NASDAQ composite reached new highs.

William Rothe, chief NASDAQ trader at Alex. Brown & Sons in Baltimore, noted that stocks and bonds ignored the spike in oil prices Monday, an event that normally would set off inflation worries. But with investors now choosing to see all news as good news, Rothe said, “There’s a lot hinging on nothing going wrong.”

Among the market highlights:

* Oil stocks led the market higher, helped by talk of OPEC production cuts and by earnings reports. Discussion of a new federal energy tax--opposed by the energy industry--failed to hold the stocks back.

Among major oil stocks, Exxon jumped 2 1/2 to 60 5/8, helped in part by its strong fourth-quarter earnings report. Also, Arco leaped 5 1/4 to 115 after posting fourth-quarter earnings well above expectations.

Elsewhere, Amoco jumped 3 to 51 1/2, Mobil surged 2 5/8 to 62 7/8, Unocal gained 1 1/2 to 25 5/8, Chevron was up 2 1/4 to 70, Texaco added 1 5/8 to 59 3/4 and Phillips rose 1 to 25 5/8.

* Many financial stocks advanced as interest rates eased further. Among Southland S&Ls;, Ahmanson rose 1 to 20 1/8 and Coast Savings jumped 1 to 14 5/8. Both were mentioned as favorites of investment guru Peter Lynch in the current Barron’s magazine.

Elsewhere, mortgage financier Countrywide Credit surged 1 5/8 to 27 5/8, insurer General Re gained 4 to 117 5/8, and annuity marketer Broad Inc. added 1 1/4 to 32 1/4. Broad reported sharply higher earnings.

* Retailers were strong as Sears jumped 1 7/8 to 50 3/4 on news of additional restructuring moves. Also gaining were Wal-Mart, up 2 to 64 5/8; Penney, up 2 3/4 to 74 3/4; and Nordstrom, up 1 3/8 to 39 7/8.

Overseas, Frankfurt’s DAX average lost 18.40 points to 1,569.24. In London, the Financial Times 100-index eased 9.3 points to 2,771.9. Tokyo’s Nikkei average lost 49.36 points to 16,287.45.

Credit/Currency

The drop in interest rates was across the board, but greatest among long-term maturities.

At the closing yield of 7.19% Monday for the 30-year Treasury bond, the rate was the lowest since the 7.17% yield on Aug. 20, 1986.

Traders said investors were flocking to long-term bonds for a number of reasons, most related to the Clinton Administration: serious talk about cutting the federal deficit, a tabling of plans for a middle-class tax cut and the probability of shifting more long-term Treasury borrowing to shorter maturities.

Meanwhile, the slide in rates was bearish for the dollar, cutting the attraction of U.S. yields for foreign investors. In New York, the dollar tumbled to 123.45 Japanese yen and 1.568 German marks from 125.10 yen and 1.591 marks Friday.

Commodities

The surge in oil prices followed news that Saudi Arabia, Iran, Kuwait and Qatar agree in principle that production needs to be cut by at least 1 million barrels a day.

Saudi Arabia, which proposed the cut, said it should be shared among the 12 OPEC members in proportion to their production quotas. OPEC in November set a ceiling of 14.6 million barrels a day for the first few months of 1993, but estimates indicate output has consistently exceeded that.

Despite Monday’s jump, traders said oil will likely steady at the $19-a-barrel level ahead of OPEC’s Feb. 13 meeting. Skepticism remains high that any OPEC cuts can stick, given OPEC’s infighting.

Elsewhere, near-term gold futures rose 20 cents to $328.80 an ounce on New York’s Comex, while silver slipped 1.6 cents to $3.69.

Market Roundup, D8