Stocks Move Lower in Face of Budget Vote : Market Overview

Caution ahead of Congressional votes on President Clinton’s budget plan kept stocks trading in a narrow range for much of Thursday’s session and the market ended mostly lower.

* Treasury bond yields retreated in moderate trading as the market reacted to falling gold prices.

Stocks

Late buying tied to the futures market allowed the Dow Jones industrial average to pare its losses in the final hour. The Dow, which was down about 15 points in late action, finished off just 3.08 at 3,548.97.

The most conspicuous losers were mining issues, which got hammered as gold prices plunged.

Declining issues outnumbered advances by about 7 to 6 on the New York Stock Exchange, with 898 up, 1,050 down and 636 unchanged.

Big Board volume came to 261.90 million shares, up from 230.04 million in the previous session.

Despite the generally hesitant mood in the financial markets, the NASDAQ composite crept to another closing high. It rose 1.71 to 715.50, exceeding the record reached on Wednesday.

Financial markets focused on Washington where the House was expected to vote on President Clinton’s deficit-reduction package. The Senate vote was slated for today.

Stock investors paid little attention to bond market gains that came in response to tumbling gold prices.

Mining stocks, which had been bid steadily higher during the recent surge in gold prices, slumped as gold prices continued to retreat. Gold extended its steep losses in New York, with spot gold falling $22 an ounce on the Commodity Exchange to $377.20.

Among the market highlights:

* Gold stocks rose with American Barrick sinking 2 1/4 to 24 3/8, and Homestake Mining fell 1 3/8 to 18 7/8.

Airline stocks fell after Delta Air Lines slashed domestic fares for the fall in what could be the first step in a wave of price cuts in the industry.

* UAL fell 2 5/8 to 142, and American Airlines parent AMR Corp. slumped 1 7/8 to 63 1/8.

* Kmart was on the NYSE’s active list for the second day, as investors applauded the retailer’s restructuring plan. The stock rose 5/8 to 22 1/4.

* Initial public stock offerings remained active. On the Big Board, bus maker Motor Coach Industries slipped to 12 1/4 from its pricing at 13.

* QuickResponse Services, which provides network services to retailers and merchandise suppliers, climbed to 16 1/8 from its pricing at 12 on NASDAQ.

In overseas activity, Frankfurt’s 30-share DAX average ended 0.14 higher at 1,860.70. Stocks ended easier in quiet trading, while in Tokyo, the 225-share Nikkei average closed down 71.91 at 20,425.64. In London, the Financial Times 100-share average gained 2.1 points to finish at 2,943.4.

CREDIT

Driving the day’s activity, bond market participants said, was a sharp decline in commodities prices, led by gold.

The yield on the Treasury’s main 30-year bond fell to 6.52%, from Wednesday’s 6.54%, pushing its price up 5/16 point, or $3.13 per $1,000 in face value. Prices and yields move in opposite directions.

The market tends to read gold and commodities prices as an indication of inflation, he said. Inflation erodes the value of investments with fixed rates of return.

The Commodities Research Bureau index, which measures commodities futures prices, fell 3.76 to 217.71.

The drop in commodities prices gave market participants reason to bid Treasury securities prices higher, analysts said.

Kathleen Stephansen, a senior economist at Donaldson, Lufkin & Jenrette Securities Corp., said investors selling gold moved their funds into other investments, including Treasuries.

Meanwhile, the likelihood that Clinton’s budget would be approved by Congress was seen as a positive for bonds, she said.

“The major risk is really on the fiscal front,” Stephansen said. “I think the market will be very, very sensitive to any positive or negative news out of Washington in terms of the budget bill.”

The bill’s provisions are expected to cut the deficit, which would mean less government borrowing and a smaller supply of bonds.

The market largely shrugged off other economic news released Thursday.

The federal funds rate, the interest on overnight loans between banks, was quoted at 3%, unchanged from late Wednesday.

CURRENCY

The dollar headed higher against most major currencies, unaffected by turmoil in the gold market that sent prices for the metal plunging by amounts not seen since the Gulf War.

Earl I. Johnson, a vice president at Harris Trust & Savings Bank in Chicago, said that while currency dealers kept a close eye on falling gold prices, the dollar was largely unaffected by the selloff.

“It was a huge correction . . . but it was expected,” Johnson said.

Helping the dollar, dealers said, was the news that U.S. jobless claims fell by 60,000 in the week ended July 31, a greater number than had been expected.

The dollar closed at 104.05 Japanese yen in New York, down from 104.88 yen on Wednesday.

It rose to 1.711 German marks, up from the previous session’s 1.708 marks.

The British pound declined to $1.496 in New York, down from $1.502.

Oil futures sank on the New York Mercantile Exchange on signs that Iraq is moving closer to agreeing to UN weapons monitoring. Light sweet crude for September delivery dropped 23 cents to $17.57 a barrel.

Market Roundup, D6