Dow Up 12 to Yet Another Record High : Market Overview

The Dow industrial average reached another all-time high on Monday and the broader market also rose following indications the economy may be picking up steam.

* Long-term Treasury bond yields soared above 6%, sending prices plunging in a powerful selloff sparked by further indications of stronger economic growth.

* Silver futures prices nose-dived on news of a new photographic film that does not contain silver. Gold followed silver lower.

Stocks

After spending most of Monday languishing in negative and then mixed territory, stocks moved higher late in the session. Lower bond prices and the corresponding rise in market interest rates had discouraged stock investors early in the day.

Shares of companies whose fortunes are closely tied to the economic cycles performed the best, among them autos, papers, chemicals and heavy machinery.

The Dow rose 12.02 points to 3,692.61, eclipsing its previous mark of 3,687.86 set Oct. 28, on Big Board volume of 256.03 million shares. Advancing issues outnumbered declines by about 10 to 9 on the New York Stock Exchange.

As corporate earnings news has slowed, investors are again looking to yields and the economy for guidance, analysts said.

The National Assn. of Purchasing Management said the nation’s manufacturing sector grew last month for the first time since May. The group’s index rose to 53.8% from 49.7% in September and was better than the 51.7% many economists had forecast.

In addition, the Commerce Department said construction spending rose 0.8% in September, the fifth straight monthly increase, but slightly below the expected 1.0% advance.

Stocks fell abroad. In Japan, the Nikkei average ended down 264.73 points at 19,438.24. Frankfurt’s DAX 30-share average lost 6.88 points to end at 2,062.12, while London’s Financial Times 100-share average lost 6.6 points to close at 3,164.4.

Among the market highlights:

* In NYSE trading, McDonnell Douglas rose 4 3/8 to 98 1/8. The company announced third-quarter earnings of $3.62 cents a share vs a loss in the same quarter last year of $1.09.

* Among the so-called cyclical issues moving higher Monday, Chrysler rose 1 1/2 to 57 3/8 and Caterpillar rose 3/4 to 92 1/4.

* In Nasdaq trading, PartnerRe Holdings traded actively, falling 1/8 to 22 7/8. The initial public offering of the Bermuda-based reinsurer’s stock was quoted at $20 late last week.

Analysts said strength in International Paper offset a drag on the Dow by shares of Eastman Kodak, which fell 7/8 to 62 on news that Xerox has developed non-silver film for graphics arts use.

* The Xerox news also sent silver and gold prices lower when trading started, thus weakening some precious metals stocks such as Placer Dome, down 1/2 at 23 7/8, Homestake Mining, down 1/2 at 18 3/4, Battle Mountain, down 3/8 at 9 1/8, and American Barrick, down 3/4 to 26 3/8.

* Paramount Communications fell 3/8 to 80 on disappointment that new bidders did not jump into the contest to acquire the company, Wall Street arbitragers said.

* The most-active blue chip was RJR Nabisco, up 1/4 at 6.

Other Markets

The bond market’s decline, its sixth in eight sessions, defied the sharp drops in precious metals prices, a trend that normally spurs bond buying.

The long-bond’s yield jumped to 6.03% from 5.96% on Friday, while its price, which moves in the opposite direction, dropped 31/32 points, or $9.69 per $1,000 in face value.

In the past month, a string of reports suggesting economic strength--and higher inflation--have spooked investors worried that bond prices may have peaked.

Monday’s report on the expanding manufacturing sector and the Commerce Department’s construction spending report added to investor nervousness.

The federal funds rate, the interest on overnight loans between banks, was quoted at 3.125%, up from 3.063% late Friday.

In other markets:

* Silver for December delivery tumbled 14.2 cents on the New York Comex to $4.225 an ounce, its lowest price since Oct. 5. Gold followed silver down, sinking $7.50 to $362.10 an ounce.

Xerox Corp. said its new VerdeFilm, which will be marketed first to professional photographers, creates images that are as clear as those made by conventional film but is developed with heat rather than chemicals.

Conventional photo film accounts for about 30% of silver consumption.

* On the New York Merc, light sweet crude for December delivery climbed 50 cents to $17.42 a barrel.

* The dollar finished mixed against other currencies in quiet trading, a holiday in many European countries.

Market Roundup, D8