FINANCIAL MARKETS : New High for Dow; T-Bond Yields Soar : Market Overview
The Dow Jones industrial average crept to a record close Wednesday, helped by several solid corporate earnings reports, but rising interest rates depressed the broader market.
* Treasury bond yields soared as $4 billion in new corporate debt, much of it unusually long-term, saturated a market still reeling from Federal Reserve Board Chairman Alan Greenspan’s tough talk on inflation.
* The dollar continued its slide against the German mark in trading that produced little overall change in the value of the greenback.
Stocks
After trading in negative territory for much of the day, the Dow shot to its record close in the session’s last 15 minutes, rising 10.62 points to 3.555.40. Analysts said there was no discernible news to account for the gain. Its previous record close of 3,554.83 was set May 27. But the broader market was less robust, with declines leading by about 7 to 6 on the New York Stock Exchange. Big Board totaled 278.59 million shares, down from 277.42 million on Tuesday.
The market gained little direction from stocks abroad. In Tokyo, the 225-issue Nikkei average was up 42.91 points to 20,080.91. The German DAX-30 share average lost 15.18 points to finish at 1,823.81. In London, the Financial Times 100-share average index closed 9.8 points off at 2,814.1.
* Investors continue to watch corporate profit reports closely, analysts said. Share prices of some companies fell despite solid earnings reports, including Northern Telecom, which fell 1 5/8 to 22 7/8; Colgate-Palmolive, which dropped 2 1/2 to 50 3/4, and Unifi, which fell 4 1/8 to 25 3/4.
* AMR Corp., the parent of American Airlines, rose 2 1/8 to 65 1/2 after a better than expected earnings report. Other airline shares rose on lower oil prices.
* Drug stocks were mixed after several pharmaceutical companies posted quarterly results. Bristol-Myers Squibb fell 5/8 to 57 1/2 after reporting higher profit but lower sales.
* Johnson & Johnson said its earnings rose 10%, but the stock fell 1 1/2 to 38 1/4. Pfizer said earnings rose and the stock jumped 1/2 to 64.
* Handleman fell 1 3/4 to 11 1/8 after saying it expects a first-quarter loss because of a decline in sales.
* Tiphook rose 1 to 10 5/8 amid speculation that Transamerica Corp. is eyeing the company for a takeover.
* In NASDAQ trading, many technology stocks ended lower again. Microsoft fell 1 1/2 to 79 after Soundview Financial Group cut its earnings estimate for the company.
* Allstate Financial lost 6 3/4 to 6 3/4 after a poor earnings forecast.
Credit
The day’s biggest corporate bond sale, a $2-billion offering from the Tennessee Valley Authority, got off to a rocky start. The utility was forced to cancel one part of the deal--$1 billion in 30-year bonds--which it replaced by selling more 10- and 50-year maturities.
But TVA’s half-century bonds were surpassed in length by 100-year bonds sold by Walt Disney Co. Disney was able to double the deal’s anticipated size to $300 million amid strong demand following wide publicity surrounding the offering.
In the Treasury market, the yield on the government’s main 30-year bond surged to 6.62% from 6.55% on Tuesday. The bond’s price, which moves in the opposite direction of its yield, fell 29/32 point, or $9.06 per $1,000 in face value. It was the long bond’s biggest one-day drop in more than two months.
Market participants noted a continued negative response to Greenspan’s comments Tuesday before a House Banking subcommittee that the Fed is leaning toward tightening the money supply to control inflation.
“There’s the growing realization that Mr. Greenspan’s testimony Tuesday was more negative for bonds than the initial reaction,” said Joseph Liro, chief economist at S.G. Warburg.
Fears that the Fed might act soon to raise short-term interest rates, which would erode the value of fixed-income securities, hit prices of shorter-term securities the hardest Tuesday.
The federal funds rate, the interest on overnight loans between banks, was 3.375%, up from 3% on Tuesday.
Other Markets
Currency brokers said all eyes remained on the European Monetary System, which fixes several European currencies in a tight trading range. The mechanism has come under assault repeatedly in recent months as speculators guessed weaker currencies would not be able to maintain their levels against the mark.
The dollar declined for a fourth day against the mark, falling to 1.698 marks in New York from 1.700 a day earlier. It also dipped to 108.13 Japanese yen, down from 108.15 a day earlier.
Meanwhile, gold prices closed at $389.20 an ounce on the Commodity Exchange in New York, down $2.70 from Tuesday. Silver lost 9.5 cents, trading at $4.945 an ounce.
On the New York Mercantile Exchange, light, sweet crude oil for September delivery rose 9 cents to $17.93 a barrel.
Market Roundup, D6
