FINANCIAL MARKETS : New High for Dow; T-Bond Yields Soar : Market Overview
The Dow Jones industrial average crept to a record close Wednesday, but the broad market was mostly lower.
* Long-term Treasury bond yields soared as profit takers moved in, reacting in part to $4 billion in new corporate debt--much of it unusually long-term. Disney, for example, sold $300 million in 100-year bonds, a rarity.
Stocks
After trading in negative territory for much of the day, the Dow shot to a record close in the session’s last 15 minutes, rising 10.62 points to 3,555.40. That topped the old peak of 3,554.83 set May 27.
But analysts noted that the broad market continued to be weak. Nearly every other major market index closed lower on the day.
On the New York Stock Exchange, losers led gainers by about 7 to 6 as volume remained active at 278.59 million shares.
Traders said the broad market was hurt in part by interest rate worries. Long-term bond yields jumped, halting the rally that has carried rates to historic lows.
Meanwhile, earnings reports provided for much of the action in individual stocks--good and bad.
Among the market highlights:
* The Dow got a late lift from United Technologies, up 1 5/8 to 54 7/8 after reporting better than expected earnings. Another Dow stock--Chevron--leaped 2 to 86 1/2, though there was no news.
* AMR, parent of American Airlines, jumped 2 1/8 to 65 1/2 after its earnings report. Other airlines were mostly higher. Delta gained 1/2 to 50 3/4, Alaska Air rose 3/8 to 13 and USAir added 1/4 to 16 1/8.
* Many industrial issues were strong. Kennametal surged 2 1/8 to 33 5/8 after reporting quarterly earnings up 185%. Ingersoll-Rand jumped 3/4 to 32 3/4 after its higher earnings report. Other industrial winners included Varity, up 1 1/8 to 32 3/4; Dow Chemical, up 7/8 to 58 3/4, and Superior Industries, up 1 3/8 to 39 3/4.
* Technology stocks continued their rebound. Compaq rocketed 3 3/8 to 49 on surprisingly stellar earnings news. Other gainers included Conner Peripherals, up 1 1/8 to 11 1/8; AST Research, up 1 1/4 to 15 1/2; Cabletron, up 2 1/4 to 103 1/2; Lotus Development, up 2 1/4 to 39 5/8, and Newbridge Networks, up 3 1/8 to 53 7/8.
* Several consumer products stocks were slammed by disappointing earnings reports, including Colgate Palmolive, which slumped 2 1/2 to 50 3/4 despite reporting 15% higher earnings. Analysts focused on the company’s lack of sales growth.
Also, Johnson & Johnson shares slid 1 1/2 to 38 1/4 after it reported a 10% earnings gain, but noted weak health care products sales growth in many countries. Bristol-Myers, which reported numbers similar to J&J;’s, saw its shares lose 5/8 to 57 1/2.
Pfizer, however, added 1/2 to 64 on its earnings report.
* Riverboat casino stocks suffered another round of selling. President Riverboat fell 3 3/4 to 31, Boomtown lost 2 1/2 to 19 1/2, Players International dropped 1 3/8 to 16 and Casino Magic tumbled 2 3/8 to 17 7/8.
Overseas, Tokyo’s Nikkei average stabilized, adding 42.91 points to 20,080.91. In Frankfurt, the DAX index lost 15.18 points to 1,823.81. In London, the FTSE-100 index slipped 9.8 points to 2,814.1.
Credit
Long-term Treasury yields surged as profit takers hit the bond market.
The yield on the benchmark 30-year T-bond jumped to 6.62% from 6.55% on Tuesday. The yield reversal was the most significant in more than two months.
Traders said sellers were partly motivated by renewed worries about inflation. On Tuesday, Federal Reserve Board Chairman Alan Greenspan told Congress that recent inflation figures were disappointing, especially in light of the weak economy.
He also warned that the Fed stands ready to boost short-term interest rates to fight inflation if necessary.
“There’s the growing realization that Greenspan’s testimony was more negative for bonds than the initial reaction,” said Joseph Liro, economist at S.G. Warburg.
But T-bond owners also may have been selling to lock in better yields on corporate bonds. About $4 billion in new corporate debt was sold Wednesday.
In one of the most-watched deals, Walt Disney Co. doubled a planned offering of 100-year bonds--among the longest-term issues ever sold--to $300 million because of heavy demand from institutional investors. The bonds were sold with an annualized yield of 7.55%.
But a $2-billion offering from the Tennessee Valley Authority had to be restructured. 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.
Other Markets
The dollar declined for a fourth day against the German mark, falling to 1.698 in New York from 1.700. It also dipped to 108.13 Japanese yen, down from 108.15.
Near-term gold futures closed at $389.20 an ounce on the Comex, down $2.70. Silver slumped 9.5 cents to $4.95.
On the New York Merc, light, sweet crude oil for September added 9 cents to $17.93 a barrel.
Market Roundup, D8
