FINANCIAL MARKETS : Dow Gains 23; Yields, Grain Prices Surge
Market Overview * Stocks rallied Wednesday amid renewed optimism about the economy, as investors all but ignored higher interest rates and a sharp jump in grain prices.
* Long-term bond yields resumed their upward path amid persistent inflation worries and the second Treasury auction in a row to meet with mediocre demand.
* The Commodity Research Bureau index leaped 1.5% as corn, wheat and other grain prices rocketed, on the heels of poor Midwest harvest reports.
Stocks
A late rally carried the Dow industrials up 23.48 points to 3,663.55, and the broad market followed in a renewed burst of bullishness.
Winners topped losers 12 to 9 on the New York Stock Exchange and 13 to 11 on Nasdaq, as Big Board volume rose to 283 million shares from 276 million on Tuesday.
Broader market indexes posted bigger percentage gains than the Dow. The Nasdaq composite index, for example, leaped 6.66 points, or 0.9%, to 776.50, better than the Dow’s 0.7% rise.
Traders noted another surge of buying in stocks sensitive to economic cycles, including autos, technology, mining, papers and chemicals.
Many of those stocks have rallied in recent weeks, as government reports have detailed rising strength in the economy, which should produce higher profits for many companies in 1994.
Perceptions that the economy may finally be picking up were reinforced by a stronger than expected report on October orders to computer chip makers.
The book-to-bill ratio report, released late Tuesday, is considered an important indicator for the whole technology sector. It slipped to 1.00 in October from 1.01 in September, meaning the chip industry got $100 in new orders for every $100 in chips shipped.
Analysts had expected the ratio to fall to between 0.95 and 0.98 in October, indicating slowing demand for computer products. But the slowdown didn’t materialize.
Also generating optimism Wednesday was the sense among many investors that Vice President Al Gore was the stronger in his debate Tuesday on the North American Free Trade Agreement with Texas billionaire Ross Perot, said Alfred Goldman, analyst at A.G. Edwards & Sons.
“That created a better feeling about NAFTA’s chances in Congress next week and about the President,” Goldman said.
Many analysts believe that the global economic recovery depends on a continued move toward freer trade worldwide.
Among the market highlights:
* Computer chip makers surged on the book-to-bill report. Intel jumped 2 1/2 to 63 1/2, Motorola leaped 3 1/8 to 102 7/8, Texas Instruments rocketed 4 to 63 1/8 and National Semiconductor gained 1 3/4 to 17 7/8.
* Tech stocks in general were strong. IBM added 3/4 to 49 7/8, Compaq rose 2 1/4 to 68, Hewlett-Packard gained 2 1/2 to 79 3/8, Microsoft jumped 3 1/8 to 81 3/8, Creative Technologies was up 1 5/8 to 28 1/4 and Newbridge Networks advanced 1 5/8 to 62.
* Among industrial issues, GM surged 2 1/2 to 51 1/8, Ford added 7/8 to 61 3/4, Caterpillar gained 7/8 to 90 7/8, Bethlehem Steel rose 1 1/4 to 17 5/8, Alcoa surged 1 3/8 to 69 3/4, Monsanto jumped 1 1/2 to 71 3/8 and Georgia-Pacific was up 1 1/2 to 67 1/2.
* Transportation stocks followed the industrials higher. CSX jumped 2 to 83 7/8, Federal Express rose 1 to 67 3/4 and United Airlines parent UAL gained 2 1/4 to 150 5/8.
* Retailers also rallied, on rising optimism about Christmas sales. Nordstrom rose 1 1/2 to 36 1/4, J.C. Penney added 7/8 to 52 1/4, Wal-Mart jumped 5/8 to 29 1/4, Circuit City leaped 1 5/8 to 27 7/8 and Toys R Us gained 7/8 to 39 1/8.
* Some classic growth stocks attracted new buying. Lilly rose 1 1/8 to 57 7/8, U.S. Healthcare gained 2 1/8 to 55 1/8, Procter & Gamble surged 1 5/8 to 56 1/4 and Wrigley added 1 1/8 to 43 3/4.
* Among Nasdaq issues leading that market higher, Pacific Physicians rocketed 3 1/4 to 27, Westwood One jumped 1 1/2 to 9 1/4 and America On-Line leaped 4 to 68 1/2.
* On the downside, some media issues were weak. News Corp. tumbled 3 1/4 to 53 after reporting disappointing quarterly earnings.
Another issue losing ground on its earnings report was Disney, off 1/8 to 41 1/8. CBS also fell, losing 3 1/2 to 289 1/2.
Most Baby Bell issues also dropped, including BellSouth, off 1 1/8 to 57 1/8; Bell Atlantic, down 7/8 to 62 1/8; and US West, off 3/8 to 47 1/8. But Pacific Telesis surged 3 1/8 to 56 5/8 in advance of a major announcement expected today.
Overseas, London’s FTSE-100 index added 2.5 points to 3,098.5, while Frankfurt’s DAX index inched up 1.01 points to 2,023.84.
Meanwhile, Hong Kong’s rally resumed, as the Hang Seng index shot up 236.90 points, or 2.6%, to 9,325.44.
Credit
Bond yields were higher across the board, responding to a disappointing inflation report and a jump in some commodity prices.
The 30-year Treasury bond yield leaped to 6.20% by the close, up from 6.14% on Tuesday, a resumption of the rise in rates that began in earnest last week.
On Wednesday, yields began rising after the Labor Department reported a 0.4% increase in October consumer prices, largely due to higher gasoline taxes. Apart from food and energy prices, the index was up 0.3%.
Both figures were roughly in line with expectations. But many traders had been hoping for lower numbers to calm investor fears that the rebounding economy will eventually push up interest rates and inflation.
Adding to anxiousness Wednesday was a jump in key commodity prices, a byproduct of the summer’s Midwest floods.
Finally, investors gave a lukewarm reception to the Treasury’s sale of $12.1 billion in new 10-year notes. The average yield on the notes was 5.69%, and the bid-to-cover ratio, a measure of the number of bids offered to those accepted, was a below-average 2.28 to 1.
Other Markets
Corn and soybean futures leaped their daily permitted limits Wednesday after the Agriculture Department slashed its estimates of this year’s harvest.
December corn futures soared 12 cents to $2.735 a bushel in Chicago, the highest close for the near-term contract since July, 1990.
November soybean futures, which traded without a limit, rose 48 cents to $6.79, the highest since the first week in August.
In a report late Tuesday, the Agriculture Department lowered its estimate of the nation’s corn harvest to 6.50 billion bushels and of soybeans to 1.83 billion bushels--both well below analysts’ estimates and sharply down from last year’s record harvests.
A series of weather disasters this year, beginning with a wet spring, a cool, flood-ridden summer and an early frost, bit into crop yields.
Analysts predicted corn and soybean prices would rise sharply again today due to the leftover buy orders that went unfilled Wednesday at the Chicago Board of Trade.
Other grain prices climbed in sympathy Wednesday, helping to push the closely watched Commodity Research Bureau index up 3.20 points, or 1.5%, to 220.95.
Elsewhere:
* Gold continued its slow advance, with near-term futures adding 80 cents to $376.80 an ounce on the Comex. Silver gained 5 cents to $4.57.
* Energy prices continued to decline. On the New York Merc, light, sweet crude oil for December eased 11 cents to $16.55 a barrel.
* The dollar slipped against most currencies in technically driven trading.
Market Roundup, D10
