Profit Reports Depress Stocks; Bond Yields Off : Market Overview
Stocks fell Wednesday, depressed by some mixed corporate earnings reports that outweighed solid news on the economy.
* Government bond yields fell moderately in seesaw trading.
Stocks
The market drifted in mostly negative territory throughout much of the day. Investors looked mostly to corporate profit reports, which moved individual stocks, analysts said.
The Dow average fell 12.01 points to 3,553.45 on Big Board volume of 273.1 million shares, up from 256.75 million Tuesday. Declining issues narrowly outnumbered advances on the New York Stock Exchange.
Digital Equipment reported worse-than-expected fourth-quarter results, and the stock fell 1/2 to 37 3/8. Borden also reported weaker-than-forecast second-quarter results and halved its dividend. Borden dropped 1 3/8 to 15 7/8.
Both Ford and Chrysler reported improved profits, although Ford cited concern about weakness in Europe. Chrysler fell 2 to 42 5/8, despite the good news, while Ford rose 3/4 to 52.
Some analysts described the decline in stock prices as a normal pullback after Monday’s broad-based advance. The Dow eased 2.24 points Tuesday after a record high on Monday.
“It’s a continuation of the normal R & R after Monday’s burst upward,” said Alfred Goldman, an analyst with A.G. Edwards & Sons.
The market gained little support from stocks abroad.
Share prices ended at their lowest level of the day in Frankfurt, with the 30-share DAX average closing down 11.32 at 1,833.91. Tokyo’s 225-share Nikkei average fell 61.81 points to 19,829.58. On the London Stock Exchange, the Financial Times 100-share average was up 4.8 points at 2,884.2.
Credit
The bond market responded to reports that President Clinton is considering an executive order to control mandatory spending, known as entitlement spending.
The yield on the Treasury’s main 30-year bond fell to 6.65% from Tuesday’s close of 6.68%. Its price, which moves in the opposite direction, rose 13/32 point, or $4.06 per $1,000 in face value.
The news raised expectations for substantial deficit reduction, helping fuel stronger-than-expected investor demand at the Treasury’s auction of new five-year notes.
Bond trading got off to a rocky start after the Commerce Department released its durable goods report. But bond prices recovered as details of the report emerged, economists said.
Buying picked up further, following the late-morning news of Clinton’s support for an executive order over entitlements.
A substantial reduction in the federal deficit would bolster the value of existing bonds because the Treasury could pare its sales of new securities, decreasing supply in the secondary market.
The bullish tone continued into the government auction. The Treasury sold $11 billion in five-year notes at a yield of 5.25%, well within expectations. The bid-to-cover ratio for the five-year note, a comparison of the number of bids submitted to those accepted, was 2.77-to-1, better than the 2.60 average of the previous 10 auctions.
The federal funds rate, the interest on overnight loans between banks, was 2.938%, unchanged from late Tuesday.
Other Markets
A strong report on orders for durable goods in June sent silver futures higher on the Commodity Exchange in New York.
On the Commodity Exchange in New York, silver for current delivery rose 8.7 cents to close at $5.154 an ounce.
Gold futures followed silver higher, aided by a weaker dollar. Gold for current delivery closed at $393.40 an ounce, up $2.20 from Tuesday’s close.
While trading in the dollar was generally light Wednesday, it did drop to 104.85 Japanese yen--just short of its post-World War II low--before rebounding sharply to 105.80 in late-afternoon trading in New York. It was down from 106.10 yen a day earlier.
The dollar fell in New York to 1.717 German marks, down from 1.728 on Tuesday.
Market Roundup, D6
