Dow Chalks Up First Gain of Week : Market Overview
The stock market closed higher for the first time this week, encouraged by fresh favorable news on the economy.
* Long-term interest rates fell sharply after a better than expected auction of 30-year bonds.
* The dollar fell against most major currencies but rose against the Japanese yen as uncertainty gripped the market about the Clinton Administration’s position on the yen.
* Gold retreated after Wednesday’s strong gain.
Stocks
Stocks responded enthusiastically to government reports showing a decline in weekly jobless claims and an increase in last month’s retail sales.
The Dow Jones average, down 29.72 points over the week’s first three sessions, rose 10.27 points to finish the day at 3,422.69.
In the broader market, advancing issues outnumbered decliners by about 7 to 5 on the New York Stock Exchange. Trading volume was an estimated 257.19 million shares, up from 251.91 million in the previous session.
The Labor Department reported that initial claims for state unemployment insurance dropped by 12,000 in the week ended Jan. 30.
The figure provided new support for hopes that a pickup in the pace of business activity had begun to make its presence felt in the job market.
Separately, the Commerce Department said retail sales increased 0.3% last month.
A positive signal on the inflation outlook is expected Friday in the government’s monthly producer price index of finished goods. Analysts look for the index to show a gain of 0.1% or 0.2% for January.
Among the market highlights:
* General Motors reported a fourth-quarter operating profit of $273.3 million before extraordinary charges. GM shares gained 1 1/4 to 40 1/2. Ford Motor, meantime, gained 7/8 to 50 5/8, and Chrysler rose 5/8 to 40 7/8.
GM traded at its highest level in a little more than a year; Ford at its highest since 1989, and Chrysler since 1987.
* Sears, Roebuck climbed 1 1/2 to 51 1/2, touching five-year highs. In a meeting with security analysts, Sears officials said the company’s restructuring and upgrading program was on track to reduce debt and improve cash flow.
* Allied-Signal, like GM and Sears a component of the Dow Jones industrial average, jumped 2 5/8 to 66 7/8. The company said it received a $500-million contract to develop a navigation unit for the Army’s mobile rocket launcher.
* Numerous other industrial stocks with close links to the ups and downs of the business cycle also advanced. In the metals group, for example, Phelps Dodge rose 1 to 54 1/2; Reynolds Metals 1 to 56 3/8, and Asarco 3/4 to 28 1/4.
* Among forest products issues, Georgia-Pacific gained 2 3/8 to 67 1/8; Louisiana-Pacific 2 7/8 to 78 1/2; Weyerhaeuser 2 1/8 to 44 1/8, and Potlatch 3/4 to 49 7/8.
* British Petroleum gained 1 1/2 to 47 7/8. The company reported higher fourth-quarter operating earnings.
* Timberland Co. picked up 2 to 29. Fourth-quarter earnings for the footwear manufacturer came to 44 cents a share, up from 31 cents a share in the corresponding period a year earlier and well above expectations.
* Proteon, traded in the NASDAQ market, dropped 7/8 to 8. The company late Wednesday reported fourth-quarter earnings of 2 cents a share, against 14 cents a share in the like period a year earlier.
* Fremont General Corp. closed 1 1/8 higher at 37 7/8 after touching a 52-week high earlier in the day.
Overseas, London stocks advanced cautiously, with the Financial Times 100-share average closing up 17.9 points to 2,834.3.
In Frankfurt, the Dax average closed up 1.24 at 1.651.04.
Tokyo’s financial markets were closed for a national holiday.
Credit
The buoyant third and final leg of the Treasury’s quarterly refunding pushed the yield on the Treasury’s 30-year bond lower.
The long bond’s yield closed at 7.20%, down from Wednesday’s 7.24%, while its price, which moves inversely to the yield, rose 9/16 point, or $5.63 per $1,000 in face amount.
The Treasury sold $9.25 billion worth of 30-year bonds at an average yield of 7.22%, the lowest yield since the auctions began in 1977 and down from 7.66% at last November’s sale.
The third and final leg of the Treasury’s quarterly refunding followed a poor showing for 10-year notes Wednesday, when the government sold $10.76 billion worth of the securities. On Tuesday, the Treasury auctioned $15.65 billion in three-year notes.
With investors relieved of pre-auction jitters, the market is focusing on expectations for low inflation and the Clinton Administration’s announcement of its deficit reduction plans next week, analysts said.
“We’re looking at benign inflation for at least the next year,” said Joseph Liro, senior vice president at S. G. Warburg & Co. “The key threat is the deficit.”
The federal funds rate, the interest on overnight loans between banks, was 3%, up from 2.813% late Wednesday.
Currency
Curtis Perkins, a currency trader at Chemical Bank, said the dollar was bound for a tumble after riding high in recent days.
“When you’ve had a free ride for a few days, the apple cart starts to tip over,” Perkins said. But the tipping was aided and abetted by conflicting signals about Administration policy on the yen, he said.
Japan has been under heavy pressure from the United States and other major trading partners to reduce its trade surplus, which surged to a record $107.1 billion last year, including $43.7 billion with the United States.
The dollar closed at 121.185 Japanese yen, up slightly from the previous session’s 121.15 yen. The greenback declined against the German mark in New York, dropping to 1.658 marks from 1.660. The British pound dropped to $1.418 from Wednesday’s $1.426.
Commodities
Gold and silver futures retreated on New York’s Commodity Exchange amid profit taking after a powerful rally. Platinum and palladium futures continued to advance on the New York Mercantile Exchange, however.
Gold fell $1.20 to $332.20 an ounce, and silver slipped 0.5 cent to $3.757 an ounce. Platinum rose 60 cents to $371.40 an ounce, and palladium climbed 85 cents to $118.85 an ounce.
Meanwhile, crude oil futures crept higher on the Merc in cautious trading ahead of Saturday’s meeting of the Organization of Petroleum Exporting Countries, with light, sweet crude rising 8 cents to $20.26 a barrel.
Market Roundup, D6
