FINANCIAL MARKETS : Market Overview
Blue-chip stocks racked up large gains for the second consecutive session Thursday, buoyed by news of strong retail sales and an upbeat weekly employment report. The Dow Jones industrial average rose 38.75 points to 3,514.42.
* The yield on the 30-year Treasury bond sunk to another 16-year low as traders responded favorably to further signs that inflation is in check.
* Crude oil prices tumbled to near their lowest level since the Gulf War amid concerns that Iraq and the United Nations may strike an agreement that would allow Iraq to sell oil on the world market. Gold and soybean prices fell as traders took profits from recent torrid gains.
Stocks
Thursday’s gain in the Dow Jones industrial average was the second significant upward move by the widely watched blue-chip measure.
A drop in the Commodity Research Bureau index, a closely watched barometer of commodity prices, relieved some of the inflation worries that had dogged the stock market recently, analysts said.
They also said strong June sales at large retailers, including Sears, Wal-Mart and Dayton Hudson stores, helped energize the market.
The Labor Department came out with upbeat news that applications for state jobless benefits fell last week to the lowest level in nearly five months.
Don Hays, director of investment strategy at Wheat First Securities, said the variety of positive factors were “feeding” into stocks. “You’re starting to see a real nice tone to the market,” he said.
Advancing issues outnumbered decliners by about 9 to 5 on the New York Stock Exchange.
Among the market highlights:
* Several large retailers gained after reporting better than expected sales. Sears, Roebuck rose 1 7/8 to 58. It reported a 12% rise in June sales, which surprised analysts. Federated Department Stores rose 1/4 to 23 7/8, Wal-Mart jumped 1 to 26 1/2 and Kmart gained 5/8 to 20 5/8.
But Woolworth Corp. lost 7/8 to 27 after saying its second-quarter profit will be well below that of the same period a year ago.
* Prices of precious metals fell, bringing down gold mining stocks for a second day after they had moved higher Tuesday. ASA fell 1 3/8 to 48 3/8, Newmont Gold dropped 1 7/8 to 47 3/4 and Homestake Mining lost 7/8 to 19 3/8.
* Walt Disney ended unchanged at 38 3/4 after a disappointing earnings projection from its Euro Disney unit.
* Auto stocks posted gains on analyst forecasts of strong earnings and sales in the April-June period. General Motors was up 2 1/4 to 46 7/8, Chrysler gained 1 5/8 to 47 1/8, and Ford Motor moved up 1 3/4 to 51 1/4.
* Nike rose 1 1/2 to 56 after forecasting a record 1994 fiscal year.
Overseas, a strong recent rally based on optimistic sentiment for the German economy was maintained, with German stock prices closing at a 1993 high. Frankfurt’s DAX 30-share index ended up 63.94 points, or 3.72%, at 1,783.70.
London’s Financial Times 100-share index closed 2.4 points off at 2,845.9. Tokyo’s Nikkei average of 225 stocks declined 32.00 points to 19,688.67. Mexico City’s Bolsa index increased 37.11 points, or 2.24%, to 1694.67.
Credit
The decline in the 30-year Treasury bond’s yield, to 6.65% from 6.67% on Wednesday, was another indication that participants were shrugging off the steep rise in the CRB index Tuesday, when soaring soybean prices led a broad advance in commodities.
However, several traders said that day-to-day changes in commodity prices would not be enough to propel the bond market from the narrow trading range that has dominated activity in recent months.
Participants are seeking more substantial clues to the market’s direction from the June producer and consumer price statistics due out Tuesday and Wednesday, respectively.
The yield on the 30-year bond was its lowest since the Treasury began selling 30-year maturities in 1977. The previous record was set last Friday when the yield hit 6.66%.
Other Markets
There is a growing sense among energy traders that the U.N.-Iraq talks now under way will result in Iraq being allowed a onetime sale of $1.6 billion worth of crude oil. Energy traders said that would add to the overabundance of oil on the world market.
August crude oil was down 23 cents to $17.79 per barrel on the New York Mercantile Exchange but early in the session dipped to $17.55. Traders said crude oil prices may continue declining and will probably reach the post-Gulf War low of $17.45.
The recent sharp rise in soybean prices was interrupted as traders at the Chicago Board of Trade sold to take profits after prices soared this week to four-year highs.
The November soybean contract, which reflects the price at harvest, fell 6 cents to $7.09 per bushel. During the drought of 1988, when the U.S. soybean crop was severely damaged, prices hit a record high of $10.995 per bushel.
Gold for August delivery fell $2.20 to $395.60 an ounce at the Commodity Exchange, largely on profit taking from recent gains.
The dollar rose against most currencies, although the German mark gained ground because of worries that France might float its currency in the Europe’s Exchange Rate Mechanism.
The dollar was quoted at 1.7030 marks in late New York trading, down from 1.7090 marks late Wednesday. The dollar was quoted at 108.65 Japanese yen in New York late in the day, up from 107.80 yen Wednesday.
Market Roundup, D8
