FINANCIAL MARKETS : Dow Index Edges Up 3.64 as Investors Await Fed Move
Market Overview
* Blue-chip stocks meandered in a narrow range before ending with a small gain Monday, as investors fretted that the Federal Reserve may favor higher interest rates at a key policy-setting meeting today.
* Treasury bond yields rose as Wall Street dealers sought to drive up interest rates ahead of two note auctions this week.
Stocks
Investors were weighing the possibility that the Fed, which appears concerned about inflation next year, may nudge up interest rates.
“The consensus view is that the Fed will reinstate a bias toward restraint but will not change policy,” said Hugh Johnson, chief investment officer at First Albany Corp.
The Dow Jones industrial average rose 3.64 to 3,755.21 on Big Board volume of 355.91 million shares, down from Friday’s 363.75 million.
In the broader market, declining issues outnumbered advances by about 8 to 7 on the New York Stock Exchange.
Analysts also said large institutional traders have wrapped up business for the year and thus some of the usual excitement was missing.
“It’s a holiday week,” said trader Brett Discher at Dain Bosworth, calling the day “uneventful.”
Trude Latimer an analyst with Wayne Grayson Capital Corp. said bank and drug stocks were in demand but, other than that, there were no clear trends.
Brian Finnerty, a senior vice president at Unterberg Harris, said he noticed tax-loss selling but said there seemed to be a “general lack of interest” among institutional traders.
Stocks were also hurt by weak bond prices, analysts said. Stock investors like to see bond prices rise, pushing down market interest rates. Low rates make stocks more attractive and cut the cost of money to corporations.
Still, stocks ended mostly higher abroad. While in Tokyo, the 225-issue Nikkei stock average lost 647.67 points, or 3.6%, to close at 17,404.24 on political concerns, London’s key Financial Times 100-share average closed at 3,364.9, up 27.8 points from Friday’s record high.
Frankfurt’s 30-share DAX-average gained 27.14 to end at 2,178.16, up 27.14.
Mexico’s Bolsa soared 36.45 points to a new record high of 2,491.02.
Among the market highlights:
* Merck lead the most-active list, rising 1/4 to 33 7/8 amid reports the company is stepping up development of its latest experimental drug against AIDS.
* In the bank group, Citicorp rose 1 to 37 1/2 and Wells Fargo gained 3 5/8 to 128 3/4.
* Ford Motor rose 1/8 to 62 3/4. Salomon Bros. raised a rating on the stock and increased earnings estimates.
* IBM fell 1 3/8 to 58 3/8. There were reports that technical problems will force a delay in delivering updated versions of two products.
* Merry-Go-Round Enterprises rose 1/8 at 2 1/4. The company said its net loss for the third quarter and nine months ended Oct. 30 has placed it in violation of its credit pacts.
* Borden rose 5/8 to 18 5/8 amid reports that the company’s directors are considering putting the beleaguered food and chemicals company up for sale.
* On the Nasdaq, Eagle Hardware fell 6 5/8 to 19 1/8 after the company said increased competition has eaten into sales and profit.
* Nordstrom lost 1 1/4 to close at 33 1/4 amid nervousness about the holiday shopping season depressed several retail stocks. May Department Stores lost 2 to 40 3/8 on the NYSE.
* U.S. Bioscience fell 1 1/8 to 9 1/4. The Food and Drug Administration has apparently requested that the company supply more information from the trial of its Ethyol ovarian cancer drug.
Credit
The Treasury’s main 30-year bond yield rose 6.30% from Friday’s 6.28%, pushing its price, which moves in the opposite direction down point, or $3.13 per $1,000 in face value.
The bond’s price remained confined to the narrow range of buying and selling that has characterized most of this month’s price action. Amid general bearish sentiment toward Treasury bonds, fixed-income participants have been hesitant to make major purchases after a year of racking up big profits.
“As a general matter, most market participants, be they dealers or investors, had a pretty good year,” said Robert Giordano, director of economic research for Goldman, Sachs & Co.
“They generally want to preserve what they have gained and so are not anxious to participate in a major way, one way or another.”
Other Markets
* Gold bullion for current delivery settled at $389.30 an ounce, up $1.90 from Friday, on New York’s Comex. Analysts attributed the rally mainly to buying by Middle Eastern syndicates. Silver for current delivery settled at $5.108 an ounce, up 9.1 cents from Friday.
* Crude oil futures were ratcheted around on the New York Merc by dealings related to the expiration of the January contract, which expired Monday at $14.18 a barrel, up 27 cents from Friday. February light sweet crude fell 4 cents to $14.38 a barrel.
* The dollar settled mostly higher Monday in thin, pre-holiday trading.
Market Roundup, D10
