Dow Gains As Bonds Stabilize; Dollar Off : Market Overview
* Stocks ended mixed as tobacco issues leveled, following their plunge on Friday. But other consumer-brand stocks tumbled in delayed reaction to Philip Morris’ decision to discount its premier cigarette line.
* Long-term interest rates pulled back slightly after soaring on Friday, when some investors saw new signs of inflation.
* The dollar drifted broadly lower, hitting another record low against the Japanese yen despite a further attempt by the Bank of Japan to stem the decline.
Stocks
The market coped reasonably well with leftover selling pressure from Friday’s tumble, when the Dow Jones industrials dropped 68.63 points.
Monday, the Dow added 8.38 points to 3,379.19, as trading volume on the Big Board slowed somewhat, to 296.08 million shares from Friday’s 325.25 million.
Friday’s drop was sparked by a 23% plunge in shares of Philip Morris, after the tobacco giant shocked investors with news that it will discount its top-of-the-line cigarettes.
The decision was an admission that Morris, like many other consumer-brand companies, has lost the pricing flexibility it enjoyed in the 1980s.
Monday, while the Dow inched up, some key consumer stocks sold off in reaction to Morris’ troubles. And overall, losers topped winners by narrow margins on both the Big Board and NASDAQ, suggesting that all is not well on Wall Street.
Nonetheless, “some people worried that the plunge would crack the market, but it didn’t,” said James Melcher, president of Balestra Capital.
Among the market highlights:
* Philip Morris stabilized, adding 1/2 to 49 7/8 after plummeting 14 3/4 on Friday. Among other tobacco issues, RJR Nabisco fell 3/8 to 6 3/8 and American Brands was unchanged at 30, but Loews jumped 2 5/8 to 96 5/8, and UST added 1 to 27. Tobacco issues had lost between 11% and 23% of their value in Friday’s debacle.
* Worries about the potential erosion of value in other brand names hit a slew of consumer stocks. Investors fear that other brand-name giants may be forced to discount to retain market share in an increasingly competitive global market.
Procter & Gamble dropped 1 1/4 to 47 3/8, Colgate-Palmolive tumbled 2 5/8 to 62 1/8, Gillette slid 1 3/4 to 57 7/8, and Duracell lost 1 3/8 to 33 1/4.
Some retailers fell on similar fears. Home Depot dropped 1 1/4 to 59 1/4, and Wal-Mart slid 3/4 to 29 3/4.
* Food stocks were also hit on brand worries. Kellogg fell 1 3/4 to 58 7/8, Quaker Oats lost 1 3/8 to 65, General Mills dropped 1 1/8 to 69, CPC gave up 1 to 42 1/2, and Sara Lee eased 3/4 to 26 1/2.
* The day’s big winners: Energy issues, which were the first quarter’s hot stocks. Arco rose 3 3/8 to 121 1/4, Chevron soared 2 1/2 to 83 1/2, Unocal gained 1 1/4 to 29 1/2, Exxon rose 7/8 to 67, Texaco zoomed 1 5/8 to 64 3/4, and Amoco added 1 3/8 to 58 7/8.
* Lumber and paper stocks recovered from last week’s selloff, which was in anticipation of Friday’s lumber summit. Analysts said they doubted the summit will result in sharply lower wood prices. Weyerhaeuser soared 3 1/8 to 42 1/4, Louisiana Pacific rose 1 3/8 to 70, and Georgia Pacific jumped 3 to 61 3/4.
* General Instrument rocketed 3 3/8 to 29 1/8 on reports the company could soon build converters to expand the abilities of a television set to include functions of a personal computer.
Overseas, London’s Financial Times 100-share average sank 31.1 points to 2,838.8 in delayed reaction to Friday’s Wall Street fall. In Frankfurt, the DAX index slipped 3.06 points to 1,658.69.
In Tokyo, the latest market surge continued, as the Nikkei average added 312.52 points to 19,759.46.
Credit
The bond market began to reassess its outlook after what some said was an overreaction Friday to new fears of inflation.
The Treasury’s 30-year bond yield, which had rocketed from 6.96% Thursday to 7.06% Friday, slipped back to 7.02% Monday. Shorter-term yields also fell.
Friday’s rate surge was sparked by the government’s March employment report. While jobs were lost in the economy in the month, the average wage rate rose--which bond traders took as yet another sign that inflation is stronger than expected this year.
Bonds have been troubled since late February by sharply rising commodity prices. Initially, many bond traders ignored the commodity rise, but by last week many traders seemed to be seeing inflation behind every tree.
Trading was light, with many participants refraining from major moves ahead of two inflation reports. The government is to release its producer price report for March on Thursday and its consumer price report for March on Friday.
The federal funds rate, the interest on overnight loans between banks, was 3%, down from 3.063% late Friday.
Other Markets
Activity was light in the currency markets as traders searched in vain for news that might change the market’s generally bearish sentiment toward the dollar. Participants were also awaiting further clues in the two important inflation reports slated for release later this week.
Dealers said the Japanese central bank’s intervention, which came during overnight trading in Tokyo, was bigger in scope than its move on Friday to prop up the dollar.
But the move failed to spur a rebound in the dollar, which repeatedly hit postwar lows against the yen last week amid apparent support by the major industrialized nations for a stronger yen as a way to cut Japan’s huge trade surplus.
The dollar closed in New York at 113.70 Japanese yen, down from late Friday’s 113.75 yen, its third- straight record low.
The German mark continued to gain against the dollar. The greenback settled at 1.595 German marks, down from 1.598.
The British pound fetched $1.521 Monday, slightly less than late Friday’s $1.522.
In commodity trading, gold for current delivery, which rose $8.70 an ounce over the last four trading sessions on the Comex, fell $1.40 to close at $339.50.
Silver fell 5 cents to $3.91 an ounce.
Light, sweet crude oil for delivery next month settled at $20.62 per barrel, down 3 cents, on the New York Mercantile Exchange.
Unleaded gasoline for delivery in May settled at 60.20 cents a gallon, down 0.45 cent.
Home heating oil for delivery next month settled at 56.95 cents a gallon, down 0.29 cent.
Market Roundup, D8
