Inflation News Lifts Stock, Bond Prices : Market Overview
* The stock market managed to sustain solid gains Friday despite selling late in a busy session that capped a week of renewed investor interest in consumer companies.
* Another pleasant inflation surprise drove long-term interest rates to record lows Friday for the second straight day.
Stocks
More good inflation news fueled further buying in the bond market, driving down interest rates and sparking enthusiasm on Wall Street.
The Dow Jones average rose 8.10 to 3,629.73, giving it a gain for the week of 44.99 points.
Trading was brisk for a second day running. Volume on the floor of the New York Stock Exchange swelled to 366.11 million shares, the second biggest total this year and the eighth largest ever. On Thursday, 351.90 million shares changed hands.
Stocks rising in price outnumbered those declining by about a 5-to-4 margin on the Big Board.
The Nasdaq average closed at a record high for a fifth straight session. The average ended the week at 787.42, up 2.01 points.
Timothy G. Connors, managing director and head of equity services for CorestatesInvestment Advisers, said the stock market got a lift from the government’s inflation report.
The Labor Department reported the consumer price index was unchanged in September. It was the best showing for the key barometer of inflation at the consumer level since June and it came courtesy of a record decline in tobacco prices.
Connors said investors focused their attention on consumer issues that had been out of favor for months. Communications stocks also were in the limelight, as they had been since earlier in the week when Bell Atlantic and Tele-Communications revealed their intention to unite.
Analysts said the blue-chip market came under selling pressure late in the session, which was related to the expiration of index options and futures. Also, traders took profits prior to the weekend.
Analysts said the market got an initial boost from overseas markets. Germany’s 30-share DAX average finished at a new closing high of 2,015.03, up 24.96 points, while London’s Financial Times 100-share average also closed a new record of 3,120.8, up 34.5 points. Tokyo’s 225-share Nikkei average ended up 91.61 points at 20,174.42.
Among the market highlights:
* Texas Instruments shot up 2 7/8 to 65 7/8 in heavy trading after posting robust third-quarter results. Another heavily traded NYSE technology stock was International Business Machines, which rose 1 7/8 to 44 1/2.
* Kellogg’s stock also rose in a results-related reaction. Kellogg jumped 3 1/4 to 56 and spawned investor buying of other makers of consumer staples.
* On the Nasdaq, Apple Computer was the volume leader and it jumped 4 1/2 to 28 1/4. The stock surged after the firm reported better-than-expected earnings.
Other Market
Bond investors reacted to the government’s report that consumer inflation showed no increase last month.
The accumulation of reports was viewed by investors as evidence that inflation posed little immediate threat to the value of bonds, which pay fixed rates of return.
However, the two-day rally was concentrated in securities with maturities of 10 years or more.
Some analysts said the market could be due for a sharp fall because the recent boom is largely fueled by investment managers under pressure to boost dividends during a period of record low interest rates. Long-term bonds pay the highest yields.
The yield on the Treasury’s key 30-year bond plunged to a 16-year low of 5.79%, shattering Thursday’s low of 5.85%. The Treasury began regularly auctioning 30-year bonds in 1977.
The long bond’s price, which moves in the opposite direction, spurted 7/8 point, or $8.75 per $1,000 in face value.
The federal funds rate, the interest on overnight loans between banks, was 3%, up from 2.937% late Thursday.
Market Roundup, D4
