FINANCIAL MARKETS : Dow Gains 12.7; Yields Retreat as Gold Climbs

Market Overview

* U.S. stocks closed modestly higher Wednesday, led largely by consumer, banking and utility issues. Japanese stocks surged.

* Treasury bond yields retreated even though the government’s auction of new five-year notes was disappointing. Gold prices rose.

Stocks

The market ran through another active session with buyers firmly in command, on the heels of President Clinton’s State of the Union address Tuesday night.

The Dow industrials closed up 12.66 points to 3,908.00, and broader market indexes all gained.

Winners topped losers 12 to 9 on the New York Stock Exchange on volume of 305 million shares.

Traders said renewed interest in some consumer stocks helped the market’s tone, after tobacco and food giant Philip Morris reported 1993 earnings.

Also, a lack of surprises in Clinton’s speech may have relieved some investors, analysts said.

In Tokyo, shares surged as foreign investors continued to pile into the market. Growing hopes that the government may still get political reform bills passed--despite last week’s defeat of the measures in Parliament--helped sentiment. The Nikkei index jumped 489.85 points to 19,138.21.

Among U.S. market highlights:

* Philip Morris shares gained 1 3/8 to 59 1/4, boosting the Dow, though the firm reported fourth-quarter operating earnings down 33%. Analysts said Morris’ troubled tobacco operations are gaining market share and may regain some price flexibility this year.

Other tobacco issues rising included American Brands, up 1 to 35, and Loews, up 7/8 to 96 1/4.

* Morris’ earnings report also may have helped other food companies. Kellogg rose 3/4 to 56 1/4, Heinz added 1/2 to 35 1/4, Campbell Soup gained 1/2 to 39 3/8 and Ralston Purina jumped 1 3/8 to 42.

* Drug stocks were also strong. Johnson & Johnson rose 1 to 41 7/8, Pfizer added 3/4 to 62 3/4 and Alza soared 1 1/2 to 26 5/8.

* Restaurant issues sparked to life. Lone Star Steakhouses zoomed 1 1/4 to 22 1/4, Cheesecake Factory jumped 7/8 to 35 1/8 and Fresh Choice rose 1 1/4 to 28.

* Among industrial issues responding to earnings, Scott Paper gained 2 1/8 to 45 1/2. It reported lower 1993 earnings, but said it will slash 25% of its jobs. Bethlehem Steel jumped 1 5/8 to 23 1/4 on its earnings report. But container maker Ball fell 2 to 26 after reporting disappointing results.

* Banking issues, many of which have been beaten down recently, revived. Citicorp soared 1 1/2 to 41 1/8, Chase gained 1 1/8 to 35 1/4, First Chicago jumped 1 to 44 5/8 and First Interstate added 1 1/8 to 66 1/2.

* Electric and phone utility stocks also revived. The Dow utility index jumped 3.49 points, or 1.6%, to 221.46. Detroit Edison rose 5/8 to 29 1/4, Peco Energy added 5/8 to 28 1/8 and Southwestern Bell leaped 1 1/4 to 39 3/8.

* On the downside, some riverboat casino stocks slumped after Missouri’s Supreme Court ruled the state doesn’t yet have laws in place to allow gambling. President Riverboat tumbled 3 3/4 to 20, Argosy Gaming fell 1 1/4 to 19 3/4 and Station Casinos sank 2 1/2 to 19.

Overseas, London’s FTSE-100 index eased 7.9 points to 3,436.1. Frankfurt’s DAX index closed at 2,119.17, down 7.61 points.

Other Markets

Bond yields fell as buyers were enticed into the market, despite a disappointing Treasury auction.

The government sold $12 billion in new five-year notes at a yield of 5.1%, slightly above expectations.

Reflecting the relatively light demand for the notes, the bid-to-cover ratio, which compares the number of bids offered to those accepted, was 2.38 to 1. That was lower than the average ratio of 2.76 to 1 in the last 12 auctions.

Analysts said the higher than expected yield on the five-year notes helped spur demand for that issue after the auction. That demand spilled into bonds of other maturities as well.

At the close, the yield on the Treasury’s 30-year bond was 6.30%, down from 6.34% on Tuesday.

In other markets, gold rebounded, with near-term futures on the New York Comex gaining $3.10 to $384.50 an ounce. Silver added 3.5 cents to $5.12.

Heating oil and natural gas futures prices soared on the New York Merc on signs that demand for heating fuels during last week’s cold snap was stronger than traders thought. Home heating oil for February delivery jumped 2.41 cents to 52.31 cents a gallon; March natural gas surged 11.3 cents to $2.359 per 1,000 cubic feet.

Also, March crude oil futures gained 30 cents to $15.47 a barrel.