FINANCIAL MARKETS : Promising Economic News Pushes Dow to Record; Yields Climb Again : Market Overview
The Dow industrials jumped to a new high Monday, finally topping their August peak, amid encouraging economic news. But the broad market was held back by rising interest rates.
* Treasury bond yields rose for a third straight session as investors reacted to the fresh signs of economic strength, including rising car and truck sales.
Stocks
Solid mid-October sales by auto makers and a report of healthy home sales sparked optimism about the economy’s strength and boosted industrial stocks.
The Dow industrials rose 24.31 points to 3,673.61, eclipsing the previous all-time high of 3,652.09 set Aug. 25.
But the Dow’s bullish tone didn’t spill into the market as a whole. Losers edged out winners 11 to 9 on the Big Board, and volume was muted at 260 million shares.
Broader stock indexes, most of which had hit new highs in recent weeks while the Dow lagged, were down for the day or only slightly higher. The Standard & Poor’s 500 index rose 0.93 point to 464.20; the Nasdaq composite index lost 2.93 points to end at 769.75.
Still, some experts said the Dow’s rejuvenation was a positive sign for the broad market because it reflected optimism about industrial America.
“The psychology about the economy has been negative,” said James Melcher, president of Balestra Capital in New York. “But people are beginning to realize the glass is half full, not half empty.”
Others, however, said the Dow’s catch-up could mean that this episode of the bull market is nearing an end, because investors often seek the safety of blue-chips when the broad market looks toppy.
“Blue-chip buyers stepped in because that’s where there seems to be the most safety in the market at this point,” said Alan Ackerman, market strategist at Reich & Co.
Among the market highlights:
* Industrial issues leading the Dow average higher included Alcoa, up 1 3/4 to 70 3/4; Allied Signal, up 1 1/4 to 72 7/8; Kodak, up 1 3/8 to 59, and United Technologies, up 2 1/2 to 64 1/4.
Fast-food king McDonald’s also helped the Dow by leaping 2 to 56 1/2.
* Other industrial issues: Clark Equipment jumped 1 3/4 to 49 3/4, Cummins Engine added 1 1/2 to 88 1/2, Inland Steel gained 1 to 31 3/8, Deere leaped 1 3/8 to 75 3/4 and PPG Industries rose 1 3/8 to 67 1/8.
* Auto stocks, however, did not respond to the upbeat sales reports. Chrysler inched up 1/8 to 54 and Ford was unchanged at 59 1/4. GM, meanwhile, slid 1 1/4 to 44 3/4 as investors reacted negatively to its contract with the United Auto Workers union.
* Oil stocks rallied on some good profit reports for the quarter. Among those reporting, Exxon rose 1 to 65 5/8 and Unocal gained 5/8 to 30 1/8.
* Profit taking continued to rile technology stocks, though many came back from sharp losses at midday. Cabletron Systems finished 1 7/8 off at 91 3/8 after trading as low as 89. Newbridge Networks, which gained 1/2 to 59, traded as low as 53 5/8.
* Telecommunications stocks were also under pressure from profit takers. Tellabs lost 3 3/4 to 70 1/4, IDB Communications sank 2 1/2 to 49 and Qualcomm dropped 4 1/4 to 73 3/4.
* Utilities took another drubbing as interest rates rose. The Dow utility index fell 1.91 points to 238.60, the lowest level since mid-June. Bank stocks also fell again.
Overseas, London’s FTSE-100 index eased back from last week’s record highs and closed at 3,184.8, down 14.2 points.
But Frankfurt’s DAX index rose 8.22 points to a record 2,074.39. In Tokyo, the Nikkei index rose 44.50 points to 20,309.33.
In Mexico City, the Bolsa index slid 22.48 points to 2,004.64.
Other Markets
Bond yields rose again, but the selloff that had gripped the market since Thursday began to turn at midday, as buyers came back.
The yield on the Treasury’s 30-year bond closed at 6.0%, up from 5.97% on Friday but down from a midday peak of 6.04%.
Yields jumped early as reports of strong sales in autos and housing boosted optimism about the economy--bad for bonds, because faster growth would probably mean rising interest rates at some point.
But traders said buyers returned late in the day amid declines in some key commodity prices. Light, sweet crude oil futures, for example, sank 56 cents to $17.51 a barrel on the New York Merc. Analysts said the recent rally in oil, since OPEC member states agreed to limit production, appeared to have been overdone.
Also, near-term gold futures on New York’s Comex eased 80 cents to $369.40 an ounce.
Despite the latest jump in interest rates, some analysts said long-term bond yields have room to fall, even in an expanding economy, if commodity prices and inflation in general remain under control.
Market Roundup, D16
