FINANCIAL MARKETS : Dow Inches Up as 30-Year Bond Yield Stabilizes : Market Overview
Wall Street stocks closed slightly higher Monday, extending a rebound from last week’s sharp selloff.
Long-term Treasury bond yields were unchanged, ending a stunning weeklong rise.
Stocks
Lower market interest rates encouraged investors to hunt for bargains among shares that lost value last week.
But concern ahead of inflation reports due later this week dampened the enthusiasm for stocks, analysts said.
The Dow Jones average rose 4.47 points to 3,647.90 on 234.34 million shares.
In the broader market, advancing issues outnumbered declines by about 9 to 7 on the New York Stock Exchange.
Bonds managed modest advances after last week’s declines, leaving yields essentially unchanged. That was a signal to some stock investors to jump into the market, said Bill Allyn, a managing director at Jefferies & Co.
“There are enough people saying ‘Here’s an opportunity. Why should the market go down when the economic news has been pretty positive?’ ” said James Melcher, president of Balestra Capital.
Last week, stocks suffered as bonds fell following the release of stronger than expected government reports on the economy. The Dow tumbled more than 70 points on Wednesday and Thursday before recovering slightly on Friday.
Stocks ended mixed abroad. In London, shares ended lower, with the Financial Times 100-share average ending 8.0 points down at 3,077.6, while Frankfurt’s 30-share DAX average fell 1.75 points on the day to 2,010.81. Tokyo’s 225-share Nikkei average rose 34.70 to 18,625.16.
In Mexico, the Bolsa dropped 40.15 points to 1,927.92 on thin volume.
Among the market highlights:
* Mylan Labs rose 2 1/2 to 32 5/8. The company’s chairman and chief executive, Roy McKnight, died Saturday of a heart attack. Media reports said the death could further fuel takeover speculation about the generic drug maker.
* Among other actively traded NYSE issues, Paramount Communications rose 1 7/8 to 82 1/8 after Viacom sweetened its bid for the company. Viacom Class B shares fell 3 to 48 1/2 while rival bidder QVC Network fell 3/8 to 52 7/8.
* In Nasdaq trading, Medco Containment Services rose 1 1/4 to 38 1/4 after the Federal Trade Commission apparently decided not to challenge Merck & Co.’s proposed $6-billion merger with the company. Merck lost 1/8 to 32 on the NYSE.
* U.S. Healthcare added 2 to 54 3/4 after it was upgraded by Smith Barney Shearson. Other health maintenance stocks rose, including Oxford Health Plans, up 1 1/4 to 41 1/4.
* Interest rate-sensitive stocks rose after being among the hardest hit during last week’s downturn. Among them were insurers Chubb, up 1 1/8 to 80 1/4, and American International Group, which rose 1 1/8 to 87 5/8.
Other Markets
Bond market analysts tied most of Monday’s price gains to strategies by investors trying to unwind speculative trading strategies.
It was the market’s first broad advance since Oct. 28. Last week, a string of positive economic reports sent bond prices nose-diving and yields soaring more than one-quarter percentage point.
The yield on the key 30-year bond held at 6.20% from late Friday. Its price, which moves in the opposite direction, gained 3/32 point, or about 94 cents per $1,000 in face value.
Shorter-term maturities posted bigger price gains.
Prior to last week’s price plunge, traders who anticipated the trend borrowed bonds and sold them on the hope that prices would decline. On Monday, these traders bought bonds at the cheaper prices, paid off their loans and pocketed the price difference in a process called short selling.
Traders do not want to be in risky trading strategies amid the uncertainty of the Treasury’s auction of three-year notes today and 10-year notes on Wednesday, analysts said.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.063%, up from 2.938% late Friday.
In other developments:
* Gold prices closed down $2.30 at $374.80 an ounce on the New York Comex. Silver fell to $4.489 an ounce, off 0.9 cent.
* Crude oil futures ended lower in an energy selloff led by the gasoline market. Light sweet crude for December delivery fell 38 cents to $16.71 a barrel on the New York Merc.
* The dollar drifted lower against most currencies as traders took profits from the greenback’s recent advance.
Dow Jones Industrials, Nov. 8, High: 3,674.17; Close: 3,647.90; Low: 3,621.91 New York volume, Nov. 8, 1993: 234.34 million shares
