Stocks Are Mixed As Bond Yields Rise : Market Overview
U.S. stocks closed mixed but mostly down from Friday’s record highs, as encouraging economic news helped industrial issues but hurt interest-sensitive stocks.
Overseas, many foreign markets continued to surge to new highs.
* Long-term bond yields jumped as optimism about the economy sparked profit taking. Gold prices rose more than $3 an ounce.
Stocks
The market displayed its usual split personality about good economic news.
A cut in the bank prime lending rate by J.P. Morgan, from 6% to 5.5%, sparked buying of many industrial stocks on the assumption that banks are trying to spur loan growth and thus economic growth.
Also, a survey of builders by the National Assn. of Home Builders showed that 62% expect business to pick up over the next six months, compared to 48% in September.
The Dow industrials rose 12.58 points to 3,642.31, 10 points under the peak reached Aug. 25.
But renewed hopes for the economy spooked the bond market, sending yields up. That, in turn, clipped many interest-sensitive stocks such as banks and utilities.
Losers edged winners on the NYSE on heavy volume of 329 million shares. Among broad indexes, the Standard & Poor’s 500 lost 1.05 points to 468.45.
The Nasdaq composite index of mostly smaller stocks, which has been on a hot streak, lost 4.51 points to 782.91.
Among Monday’s highlights:
* Industrial issues advancing included Allied Signal, up 2 1/8 to 73 3/4; Alcoa, up 1 1/4 to 68; GM, up 1 1/2 to 46 3/8; Ford, up 1 1/4 to 58 5/8; 3M, up 2 3/4 to 107 3/8; USX-U.S. Steel, up 1 1/8 to 32 1/4; GM Hughes, up 1 1/4 to 39 1/2, and Monsanto, up 1 3/8 to 69 3/8.
* Transport stocks also gained on optimism about the economy. Among railroads, CSX surged 2 to 77 7/8 and Conrail rose 1 to 58 3/4. Elsewhere, Roadway leaped 1 1/4 to 59 1/2 and United Airlines’ parent UAL added 2 to 145 3/8.
* Among companies responding to earnings reports, Mattel gained 5/8 to 30 1/8, Cap Cities/ABC rose 11 to 626, Merck rose 1 1/4 to 32 1/4 and casino firm Promus added 1 5/8 to 82.
* On the downside, bank stocks were slammed as the prime cut boosted fears that bank profit margins will be squeezed. J.P. Morgan fell 1 5/8 to 74 1/2, BankAmerica dropped 1 1/2 to 43 1/8, Citicorp lost 1 3/4 to 35 5/8, Nationsbank sank 1 7/8 to 48 7/8 and Mellon fell 1 5/8 to 54 1/2.
* Utilities also tripped. SCEcorp lost 3/8 to 22 1/8, Detroit Edison fell 3/8 to 33 3/8 and ConEd sank 1/4 to 35 3/4.
* Among new issues, Burbank-based IWERKS sold 3 million shares at 18 each. Shares in the multimedia entertainment complex builder will begin trading today on Nasdaq.
Overseas, many markets marched to new highs. Frankfurt’s DAX index surged 18.29 points to 2,033.32 and London’s FTSE-100 jumped 16.8 points to 3,137.6, both records.
In Hong Kong, the Hang Seng index rocketed 267.15 points, or 3%, to a record 9,031.13.
But in Tokyo, the Nikkei index eased 102.21 points to 20,072.21.
In Mexico City, the Bolsa index continued its streak, rising 28.74 points to a record 1,991.61.
In Brazil, however, prices plunged on fears that elections scheduled for next fall will be moved up, creating a volatile political situation. In Sao Paulo, the Bovespa index slid 8.6% to 17,274.
Other Markets
Profit takers bailed out of bonds after the cut in banks’ prime lending rate suggested a faster path to better economic growth ahead.
The yield on the Treasury’s 30-year bond rose to 5.85% from Friday’s 5.79%, which had been a 20-year low. Shorter-term yields, however, were up only slightly.
Bond investors fear that any indication of an improving economy will put an end to the decline in long-term interest rates by boosting inflation concerns.
While there is no certainty that banks’ new willingness to lend will lead to faster growth, analysts note that some market players may not wait to find out: Because many 30-year bond owners are short-term speculators who have been betting on still lower long-term yields, they may feel compelled to abandon their bets in a hurry.
In other markets:
* Gold rose with inflation fears. On the New York Comex, near-term gold futures jumped $3.40 to $368.30 an ounce. Silver gained 7 cents to $4.41.
* The dollar firmed, helped in part by rumors of another German interest rate cut.
* A plunge in gasoline futures dragged oil lower. Light, sweet crude eased 14 cents to $18.13 a barrel on the New York Merc.
Market Roundup, D10
