FINANCIAL MARKETS : Yields Climb Again; Stocks Mixed
Market Overview * Fresh signs of economic growth in the October employment report pushed long-term bond yields up for the sixth consecutive trading day Friday, extending a three-week selloff.
* U.S. stocks, battered by two days of heavy selling, closed mixed as bargain hunters entered the market. Overseas, most foreign markets suffered deep declines.
* Gold soared to a three-month high, gaining from the turmoil in stocks and bonds.
Stocks and Bonds
The Treasury’s benchmark 30-year bond yield, which had jumped from 5.95% on Oct. 28 to 6.17% by Thursday on successive reports of renewed economic strength, rose again Friday--to 6.20%--on news of surprising job growth in October.
Friday’s yield was the highest on the bond since Aug. 24. Shorter-term yields also rose.
Analysts say investors’ eagerness all week to dump bonds is a strong sign that interest rates have bottomed, after three years of decline. However, most experts doubt that rates will climb quickly from here, because the economy’s pickup isn’t viewed as sustainable.
“This is not a vigorous labor report,” said William Sullivan, economist at Dean Witter, about the gain in jobs in October.
Nonetheless, experts say many bond speculators are bailing out of the market--after riding yields down all year--because of growing belief that 1994 will see a gradually improving economy.
In the stock market, meanwhile, investor sentiment improved somewhat Friday after two days of heavy selling blamed on jitters about higher interest rates.
The Dow industrials rose 18.45 points to 3,643.43 after diving a combined 73 points Wednesday and Thursday. For the week, the Dow lost 37.16 points.
Other key indexes also gained Friday. The Nasdaq composite index of mostly smaller stocks added 5.73 points to 762.99 but was still off 2.1% for the week.
Despite the index gains, the market’s breadth remained negative. Losers topped winners 12 to 9 on the New York Stock Exchange and 13 to 12 on Nasdaq. Trading continued to be heavy.
Analysts expect the stock market to eventually shake off concerns about interest rates and focus on prospects for higher corporate profits in a healthier economy. However, that transition could take time, Wall Streeters warn.
Among stock highlights:
* Foreign markets were broadly lower as profit takers keyed off the slumping U.S. market.
In London, the FTSE-100 index sank 63.4 points, or 2%, to 3,085.6. In Frankfurt, the DAX index lost 50.05 points, or 2.4%, to 2,012.56. In Paris, the CAC-40 index tumbled 2.6%, or 54.96 points, to 2,081.01.
Also falling sharply: Mexico City’s Bolsa index, down 43.91 points, or 2.2%, to 1,968.07; Tokyo’s Nikkei index, off 359.33 points to 18,590.46, and Hong Kong’s Hang Seng, off 207.95 points to 8,996.93.
* Wall Street’s rebound was helped by bargain hunting for utility and financial stocks, which have been crushed in recent weeks on interest rate fears.
Among utilities, Houston Industries added 5/8 to 48 3/4, SCEcorp gained 1/2 to 20 5/8 and Con Ed rose 5/8 to 32 1/8.
Among banks, Citicorp jumped 1 5/8 to 36 3/8, Wells Fargo rose 3 1/4 to 109 1/8, BankAmerica added 1 1/4 to 41 7/8, BancOne leaped 1 3/8 to 36 7/8 and Nationsbank rose 3/4 to 46.
* The Dow index was pulled up by Philip Morris, which zoomed 2 7/8 to 55 1/2 on speculation that the company plans a cigarette price increase. RJR Nabisco added 5/8 to 6 1/2 and American Brands leaped 2 1/8 to 34 3/4.
* Classic growth stocks were strong, as some buyers sought safe-haven issues. Gillette rose 3/4 to 60, McDonald’s gained 1 1/2 to 55 3/4 and Kellogg rose 1 3/8 to 56 1/8.
* Some industrial issues continued to advance, benefiting from rising expectations for the economy. Ingersoll-Rand rose 3/4 to 37 1/4, Nucor jumped 1 3/8 to 51 5/8, Dover gained 1 1/4 to 59 1/2, Varity added 1 to 38 and 3M rose 1 to 104 1/4.
In other markets Friday:
* Gold rallied again, helped by fears of deeper corrections in stock and bond markets ahead. Gold for December climbed $5.40 to $377.80 an ounce on New York’s Comex, its highest price since Aug. 11.
Silver futures leaped 12.3 cents to $4.51 an ounce.
* Oil finished lower after an early rally fell apart. Light, sweet crude for December settled at $17.09 per barrel, down 31 cents at the New York Merc.
* The dollar eased as enthusiasm over the much-awaited October employment report fizzled quickly.
Market Roundup, D6
