Dow Up 9.68 as Investors Await CPI News : Market Overview
Blue chip stocks closed slightly higher, with investors awaiting release of the consumer price index to see whether inflation slowed in May.
* Treasury bond yields finished slightly higher in quiet trading, after having plunged Friday following release of the government’s producer price index.
* The dollar fell to a third consecutive record low against the Japanese yen but was mixed against other major foreign currencies.
Stocks
The government will release the May CPI, its gauge on inflation at the retail level, early today. The producer price index, a measure of inflation at the wholesale level, was neutral in May.
The Dow Jones industrial average closed up 9.68 points at 3,514.69, on Big Board volume of 210.41 million shares, down from 253.47 million traded Friday. Declining issues narrowly outnumbered advances on the New York Stock Exchange.
“The market’s in a wait-and-see attitude ahead of the CPI data,” said Don Hays, investment strategist at Wheat First-Butcher & Singer. “People are nervous.”
Low interest rates help stocks by making them more attractive next to interest-bearing investments and allowing companies to borrow at less cost.
On Friday, stocks rose broadly after the producer price index for May showed only mild inflation, somewhat easing fears.
But today’s CPI, analysts said, will provide a clearer picture of inflation.
Also contributing to investor unease Monday was the dollar’s weakness against the Japanese yen, Hays said. A lower dollar makes imports more expensive and can encourage U.S. producers to raise prices.
The market gained little direction from markets abroad. In Tokyo, the 225-share Nikkei average was down 103.60 points to 20,397.35. In Frankfurt, 30-share DAX average closed 11 points up at 1,691.98 and London’s Financial Times 100-share average closed sharply higher, up 23.7 points, at 2,885.5.
Among the market highlights:
* Slightly diminished fears of rising interest rates gave many bank stocks a boost. Chase Manhattan rose 1/2 to 30 and J.P. Morgan rose 1 to 66 3/8. BankAmerica finished unchanged at 43 7/8.
* Transportation stocks, however, skidded on uncertainty about the economy. Burlington Northern dropped 1 to 50 3/4, XTRA lost 2 1/8 to 34 and UAL, the parent of United Airlines, lost 1 1/2 to 131 7/8.
* In other actively traded NYSE issues, Eastman Kodak rose 2 5/8 to 53 3/4 after the company disclosed plans for meetings with analysts and investors today.
* Caterpillar rose 1 7/8 to 77 3/4 on no discernible news.
* U.S. Surgical fell 3 1/8 to 26 5/8 after late Friday forecasting poor second-quarter earnings.
* Ford Motor dropped 1 7/8 to 51 7/8 after a top company executive forecast lower auto sales in Europe and financial losses for Ford there this year.
Credit
Friday’s news of static producer prices in May sent the bond market sharply higher. But the rally cooled Monday in advance of the consumer price data. Economists said they believed even if today’s inflation data is favorable, the market likely would not rally much higher because of the strength of Friday’s gains, when the 30-year bond rose more than $8 per $1,000 in face amount.
On Monday, the yield on the Treasury’s main 30-year bond rose to 6.82% from 6.81% Friday, pushing its price down 5/32 point, or $1.25 per $1,000 in face amount.
Michael Moran, chief economist at Daiwa Securities America Inc., said today’s consumer price data was viewed as less important to the market after Friday’s favorable producer prices report.
In that report, the government said its producer price index was unchanged in May following worrisome increases of 0.4% in March and 0.6% in April, the biggest one-month gain in 2 1/2 years.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.063%, up from 2.938% late Friday.
Other Markets
The Japanese yen strengthened against the dollar despite reports that the Bank of Japan intervened three times overnight by buying dollars and selling yen, analysts said.
Kevin Lawrie, a foreign exchange manager and vice president for the Mellon Bank in Pittsburgh, said the central bank apparently was just trying to slow the yen’s appreciation.
The dollar closed in New York at 105.10 Japanese yen, down from Friday’s 106.15 yen and its third postwar low in as many sessions.
The yen has risen sharply this year amid the widespread view that the United States favors a strong yen as a way to whittle its huge trade surplus with Japan. A strong yen makes Japanese products sold in the United States more expensive but cheapens the cost of U.S. products sold in Japan.
The German mark, meanwhile, weakened against the dollar. The greenback closed at 1.629 marks, up from the previous session’s 1.626 marks.
In commodities trading, gold futures prices continued their retreat until a late rally erased most of the loss and left traders uncertain about the metal’s underlying strengths.
On the Commodity Exchange in New York, gold for current delivery dropped 80 cents an ounce to $365.30.
When gold trading opened at New York’s Commodity Exchange on Monday, there was a renewal of last week’s selloff, attributed to the producer price index and other economic measures showing little inflationary pressure.
Meanwhile, silver for current delivery rose on the New York Comex to $4.212 an ounce from Friday’s $4.185.
Most energy futures were lower at the New York Mercantile Exchange, with light sweet crude oil for July delivery losing 9 cents to settle at $18.89 a barrel.
Market Roundup, D8
