FINANCIAL MARKETS : Stocks Edge Up; T-Bond Yields Slip : Market Overview
* Stocks edged higher in subdued trading, as the first major batch of second-quarter earnings hit the market. Some investors were sidelined ahead of today’s first June inflation report.
* Long-term Treasury bond yields edged down to another historic low, as commodity prices overall eased. But gold gained.
* The dollar rallied amid new talk of European interest rate cuts.
Stocks
The market was lethargic, typical for a summer Monday.
The Dow industrials added 3.32 points to 3,524.38, on light New York Stock Exchange volume of 202.94 million shares.
Gainers topped losers by about 8 to 7 on the Big Board.
“The market activity was slow, with a notable absence of even computerized activity to spur it on,” said Thom Brown, managing director of Rutherwood, Brown & Catherwood.
Some investors may have been reluctant to buy ahead of today’s government report on June producer price inflation. On Wednesday the government will detail June consumer inflation.
Initial quarterly earnings reports were mixed, providing little direction for the market.
Among Monday’s highlights:
* Technology stocks were active. Intel Corp. slipped 3/8 to 55 5/8 after the computer chip giant reported quarterly earnings at the lower end of expectations, though still up 167% from a year ago.
After the market closed, Motorola said its second-quarter earnings rose 54%. The stock gained 1 1/8 to 86 7/8 in anticipation.
Other tech winners included AST Research, up 3/4 to 15 1/2; Compaq, up 2 1/8 to 47 7/8; Apple, up 1 1/4 to 38; Cabletron Systems, up 1 3/8 to 106 5/8, and Oracle, up 1 1/4 to 50 1/8.
* Brokerage stocks continued their advance. Merrill Lynch gained 5/8 to 85 5/8, Primerica leaped 1 3/4 to 54, Quick & Reilly added 1/2 to 30 1/4, Salomon jumped 7/8 to 39 1/2 and Waterhouse surged 1 1/4 to 33 5/8.
Elsewhere among financial stocks, Federal National Mortgage sank 2 to 82 1/2. The stock jumped early in the day on news of a 14% earnings rise, but fell later after a Congressional Budget Office report questioned the company’s power over the mortgage market.
* Gold stocks were strong ahead of today’s inflation news. Echo Bay added 1/2 to 13 1/8, Hemlo rose 1/2 to 11 3/4, ASA gained 3/4 to 48 7/8 and Placer Dome was up 5/8 to 20 1/2.
* Industrial stocks were mixed. Auto stocks fell back after last week’s surge. Ford dropped 2 to 50 1/8 after brokerage Salomon removed the stock from its recommended list. GM eased 5/8 to 46 7/8 and Chrysler lost 5/8 to 46 7/8.
Among other industrials, however, Caterpillar rose 1 to 76 1/8, Tenneco gained 5/8 to 50 3/4, Inland Steel jumped 3/4 to 28 3/8 and Navistar surged 1 3/8 to 26 5/8.
* Poor earnings forecasts knocked down paper distributor Alco Standard, off 4 3/4 to 44, and retailer Duty Free International, which tumbled 6 1/4 to 19 7/8.
* Among Southland issues, Rancho Dominguez-based personal products maker Dep Corp. class A stock surged 2 1/4 to 6 1/4 after the firm said it will pay $45 million to buy the Agree and Halsa shampoo brands from S.C. Johnson Co.
Elsewhere, security services firm Pinkerton’s lost 1 to 22 despite reporting 25% higher earnings. Computer imaging systems maker New Image Industries slumped 2 to 13. The stock had tumbled last week on a disappointing earnings projection.
Overseas, German stocks continued their rally. In Frankfurt, the DAX index jumped 20.76 points to 1,818.17, the highest since 1990.
But in London, the FTSE-100 index slid 12.3 points to 2,830.90.
In Tokyo, the Nikkei average rose 102.61 points to 19,980.00.
Credit
The bond rally continued, though in extremely light trading, analysts said.
The yield on the Treasury’s 30-year bond slipped to 6.62% from Friday’s close of 6.64%. The new yield was the lowest since the Treasury began selling 30-year bonds in the late-1970s.
It was the third consecutive closing record low for the T-bond. And coming ahead of this week’s inflation reports, the bond buying--however light--suggested that investors have lost their fears about resurging inflation.
In the corporate bond market, several large issuers took advantage of low interest rates to sell new securities. A Time Warner division, for example, offered $1 billion in 40-year bonds, an unusually long maturity, in the company’s latest effort to pare debt costs.
The bonds, sold in a private placement, yielded 8.43%.
Other Markets
The dollar rallied against the German mark and French franc as funds fled those currencies amid mounting speculation that German and French interest rates will be slashed again soon.
The dollar’s allure grew as speculation intensified over the weekend that France must soon cut rates to stop its economic recession from turning into a depression. For France to reduce rates, Germany must go along as well.
The dollar closed in New York at 1.729 marks, up from 1.722 on Friday. It also closed at 5.907 francs, up from 5.854.
Against the Japanese yen, the dollar closed at 109.45, down from 109.96 on Friday.
Meanwhile, gold rebounded on New York’s Comex. Gold for current delivery closed at $394.30 an ounce, up $2.70 from Friday. Silver closed at $5.06, up 5.7 cents.
Energy futures rose on the New York Merc on perceptions that the impasse between Iraq and the United Nations over the closing of a missile test site could block a pact to get Iraqi oil back on the market. August light, sweet crude added 21 cents to $18.10 a barrel.
