FINANCIAL MARKETS : Dow Gains 12.7 as 30-Year Bond Yields Retreat

Market Overview

* Stocks finished an active session modestly higher Wednesday and last-minute rallies in a handful of stocks contributed to a closing surge for the Dow Jones industrial average.

* Treasury bond yields retreated as money managers and other large investors emerged to buy securities following the government’s afternoon auction of $12 billion in five-year notes.

Stocks

Analysts said investors had sold stocks earlier in the week, fearing a negative surprise in President Clinton’s State of the Union address on Tuesday. Stocks rose Wednesday on relief that Clinton’s speech was as expected, they said.

The Dow finished the session 12.66 points higher at 3,908.00, but short of highs reached in the day’s hectic, seesaw trading. Broader market indicators finished the day slightly higher.

Advancing issues outnumbered declines by about 4 to 3 on the New York Stock Exchange. Big Board volume totaled 304.66 million, against 326.12 million the day before.

The lower long-term bond yields and stronger prices helped stocks, particularly interest rate-sensitive utilities. The possibility of lower interest rates also helped banks and smaller companies. The Nasdaq composite index rose 2.41 to 788.80.

Among the market highlights:

* Chevron announced late in the day that it would increase its quarterly dividend by 5 cents and proposed a 2-for-1 stock split. Chevron finished the day at 92, down 1/2 but above its lows of the day.

* IBM, which reported its first profit in more than a year on Tuesday, fell 1 7/8 to 56 3/8 as traders continued to digest the report.

* In the consumer products group, Procter & Gamble rose 1 to 58 5/8. Philip Morris gained 1 3/8 to 59 1/4 after it reported fourth-quarter earnings and Merrill Lynch upgraded its near-term rating on the stock.

* Among banks, J.P. Morgan rose 1 3/8 to 69 3/4 and Citicorp gained 1 1/2 to 41 1/8.

* In the utilities sector, gainers included Detroit Edison, up 5/8 to 29 1/4, and PECO Energy up 5/8 to 28 1/8.

* Compaq Computer reported record fourth-quarter earnings that beat Wall Street estimates, but the company said it sees the pricing environment for personal computers remaining aggressive. Its shares ended off 2 1/4 to 80 7/8.

* Scott’s shares rose 2 1/8 to 45 1/2 after the nation’s largest producer of paper products said it will cut a quarter of its work force, or 8,300 employees, in a move to tackle its lower-cost competitors.

In overseas trading, Tokyo stocks surged on foreign investor purchases and late dealer buying, with the Nikkei average ending above psychological resistance at 19,000. Growing hopes that the government may soon pass its prize political reform bills after all cheered sentiment. The Nikkei 225-share average ended 489.85 points higher at 19,138.21.

Shares finished broadly lower in London with the Financial Times 100-share average closing down 7.9 points at 3,436.1. Frankfurt’s DAX average closed at 2,119.17, down 7.61 points.

Credit

Bond prices were mostly unchanged in the early going as traders bided their time ahead of the auction, heading higher after the results were released at early afternoon.

The Treasury’s main 30-year bond yield fell to 6.30% from 6.34% at Tuesday’s close. Its price, which moves in the opposite direction rose 15/32 point, or $4.69 per $1,000 in face value.

The Treasury Department said it sold a total of $12.03 billion in five-year notes at a yield of 5.10%, which was higher than general expectations of around 5.08%.

Other Markets

The dollar fell against the yen on fears that the U.S. would allow the yen to strengthen to compensate for the lack of progress in bilateral trade talks. The greenback was mixed against other currencies. The dollar closed in New York at 110.05 Japanese yen, down from 111.01 yen on Tuesday.

Meanwhile, gold closed at $384.50 an ounce, up $3.10 from Tuesday in trading on the New York Comex, while silver gained 3.5 cents to finish at $5.123 an ounce.

Elsewhere, heating oil and natural gas futures prices soared Wednesday 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.