FINANCIAL MARKETS : Yields Down as Dollar, Stocks End Mixed
Market Overview
Long-term bond yields fell to historic lows despite worries about the fate of President Clinton’s deficit-cutting package.
* Stocks ended mixed in Europe and in the United States, as currency markets calmed and as new reports suggested a slowing domestic economy.
Credit
While President Clinton warned of financial market turmoil if Congress fails to approve his deficit-reduction plan, the bond market appeared unworried.
The yield on the Treasury’s benchmark 30-year bond closed at 6.51%, down from 6.55% Monday and the lowest since the Treasury began regularly issuing such bonds in the late 1970s.
Clinton has taken credit for the sharp drop in long-term interest rates all year, arguing that his plan to slash the federal deficit had given investors a reason to believe that government borrowing will drop, and with it interest rates.
But some analysts say the bond market may be responding to another force: expectations of a further slowdown in economic growth, which would reduce private-sector borrowing even if government borrowing rises.
On Tuesday, the Commerce Department said its index of leading economic indicators rose by an anemic 0.1% in June.
Stocks
Profit taking clipped some European markets, and the U.S. market finished mixed on the heels of the leading-indicators report.
In Europe, the recent rally on expectations of lower interest rates ran out of steam in some markets--even as German, Dutch and Spanish central banks eased rates.
In Paris, the CAC-40 stock index fell 0.9%, and Brussels and Madrid shares closed with small losses. But key indexes advanced in London, Frankfurt, Milan, Zurich and Tokyo.
Germany’s Bundesbank let one of its key interest rates fall to 6.8% from 6.95%, but many analysts dismissed it as a mere token.
In the United States, the Dow industrials added 0.28 point to 3,561.27, but broader indexes fell.
Still, winners topped losers by narrow margins on the New York Stock Exchange and NASDAQ.
Among the market highlights:
* Technology stocks rallied, led by electronics firm Harris Corp., which reported stronger than expected quarterly earnings. Harris jumped 3 3/4 to 42 7/8.
Other tech winners included Compaq, up 7/8 to 47 1/4; Hewlett-Packard, up 1 5/8 to 74 1/4; Cabletron Systems, up 4 1/4 to 108 1/4, and Computer Sciences, up 1 3/4 to 86 3/4, an all-time high.
* Industrial stocks were broadly higher, as investors appeared to be more enthused about lower interest rates than worried about the weak leading-indicators report.
Alcoa gained 1 3/4 to 73 1/2, Caterpillar rose 1 3/4 to 79 7/8, Deere jumped 1 3/4 to 64 5/8 and Dow Chemical added 1 5/8 to 61.
* On the downside, energy stocks weakened. Exxon lost 7/8 to 65 1/8, Chevron sank 1 3/4 to 87 and Halliburton fell 1 to 39 1/4.
* Among Southland issues, lamp maker Dynasty Classics plunged 12/16 to 13/16. It said it was unable to reach an expected merger deal with Catalina Lighting.
Other Markets
The dollar was mixed in quiet trading as foreign exchange markets continued to adjust to the weekend overhaul of Europe’s currency system.
Although the dollar closed at another record low against the yen in Tokyo, it rose in New York trading to 104.42 yen, up from 104.37 Monday. The dollar also settled at 1.707 German marks, down slightly from 1.709. The French franc, meanwhile, continued to rebound versus the mark.
Elsewhere, near-term gold futures lost $2.50 to $403.40 an ounce on New York’s Comex, and silver sank 7.4 cents to $5.37.
Light sweet crude oil for September fell 12 cents to $17.85 a barrel on the New York Merc.
Market Roundup, D6
