Dow Climbs 32.14 on News of Low Inflation : Markets: Yields on long-term Treasury bonds fall to near-record lows. Gold prices are once again battered.
Stocks enjoyed impressive gains while Treasury bond yields tumbled to near record lows Friday as investors cheered an unexpected plunge in wholesale prices.
The Dow Jones industrial average gained 32.14 points to finish at 3,621.63, reducing its loss for the week to 12.30 points.
Broader market indexes also rallied as stocks took their cue from the bond market, where the yield on the Treasury’s widely watched 30-year bond tumbled to 5.87%, just above the record low of 5.86% set Wednesday. On Thursday, the yield closed at 5.96%.
The wholesale price numbers reassured investors that the low-inflation scenario that has sent interest rates plummeting to their lowest levels in 25 years remains firmly in place.
The Labor Department said the producer price index, an inflation measure at the wholesale level, fell 0.6% in August, depressed by a record 25.6% drop in tobacco prices. Without that, the index would have risen 0.2%.
However, the so-called core rate of wholesale inflation--excluding the volatile energy and food components--dropped a stunning 1%. Most economists were expecting a 0.2% gain in both figures.
Despite the skewing of the figure because of tobacco, analysts said the price index figure is still favorable and confirms a weak inflation picture.
They also said the market was ripe for a recovery after losing a total of 45 points in two sessions this week.
“This is really nothing more than buyers, primarily institutional portfolio managers, who withdrew their offers on Tuesday and Wednesday and returned to the market yesterday and today,” said David Holt, director of technical analysis at Wedbush Morgan.
The market was also aided by computer-guided program buying, which accelerated the upward momentum once the Dow industrials crossed the 3,600 threshold.
In the broader market, advancing issues outnumbered declines by about 2 to 1 on the New York Stock Exchange. Volume on the floor of the Big Board amounted to 266.46 million shares in late trading, compared to 257.14 million in the previous session.
The NASDAQ index rose 6.60 points to end at 744.31.
Among the market highlights:
* Royal Dutch was the most actively traded stock on the Big Board, rising 2 1/8 to 103 3/4 on more than 32 million shares after the company raised its 1993 interim dividend.
* Intel rose 3/4 to 65 1/2. Smith Barney Shearson was said to have raised its rating on the firm to “buy” from “neutral.”
* National Semiconductor rose 1 1/4 to 20 1/2 on stronger than expected earnings, which led analysts to boost their profit estimates on the company. Elsewhere in the chip group, Advanced Micro rose 3/4 to 28 1/2 and Texas Instruments gained 1 1/8 to 78 5/8.
* Paramount rose 4 to 60 7/8 after saying its first-quarter net rose to $1.01 from 96 cents a share. There have been rumors Paramount may merge with Viacom, which rose 3/8 to 66.
* Media Logic slumped 4 1/2 to 6 5/8 after the company said second-quarter sales were down sharply from the first quarter.
Overseas markets turned in a mixed performance. Frankfurt’s DAX-30 average was down 19.37 points at 1,861.44, while Tokyo’s 225-share Nikkei average finished down 7.60 to 20,817.98. In London, the Financial Times 100-share average closed 5.8 points up at 3,037.0.
Other Markets
Gold futures prices were battered anew by crude oil’s drop to a three-year low and the drop in wholesale prices.
Gold for current delivery closed at $350.20 an ounce on the Commodity Exchange, off $4 from Thursday.
A drop in crude oil futures on the New York Mercantile Exchange deepened the deflationary outlook.
Light, sweet crude oil for October delivery traded as low as $16.36 a barrel, the lowest price since early July, 1990, before recovering to settle at $16.76, down 21 cents from Thursday.
Meanwhile, the dollar closed in New York at 106.05 Japanese yen, up from 105.38 yen Thursday. It fell to 1.598 German marks, down from 1.600 the day before.
Market Roundup, D4
