Interest Rates Ease Slightly; Stocks Close Mostly Higher
Market Overview * Stocks gained modest ground Friday, stabilizing after Thursday’s tumble. But investors remained tentative because of mounting worries about the market’s health.
* Long-term bond yields eased from Thursday’s eight-month highs, as sellers took a breather.
Bargain hunters came out in enough force to lift most broad market averages modestly, but slowed trading volume illustrated investors’ underlying concerns.
The Dow industrials, which had slumped 51.78 points Thursday as interest rates shot up, eased 1.12 points to 3,838.78 on Friday.
For the week, the Dow lost 48.68 points. It now is 3.5% below its Jan. 31 record high of 3,978.36.
In the broad market, winners topped losers 12 to 9 on the Big Board, as trading volume slid to 274 million shares.
A calm bond market helped the stock market find its feet. But analysts were reluctant to suggest stocks are ready to resurge.
“We’ve seen a little recovery, but when you consider how much we were down (Thursday), it’s pretty weak,” said Harry Laubscher, analyst at Tucker Anthony.
Investors are “on their heels” waiting and wondering if the Federal Reserve Board will move again soon to tighten credit, said Ron Doran, trader at CL King & Associates.
Among Friday’s highlights:
* Telecommunications stocks tried to recover after plunging Thursday in the wake of the canceled merger between Bell Atlantic and Tele-Communications Inc.
TCI gained 1 1/2 to 23 7/8, and other cable stocks also inched up. Cablevision Systems added 5/8 to 62 7/8, Comcast was up 1/8 to 19 1/4 and Falcon Cable gained 1/8 to 11 7/8.
Among phone stocks, Bell Atlantic eased 3/8 to 54 1/8, but US West jumped 1 1/8 to 40 1/2 and BellSouth gained 1 3/8 to 55 5/8.
* Industrial issues, the market’s recent leaders, were mixed. Nucor gained 1 1/8 to 57 3/4, Dow Chemical rose 1 1/4 to 63 3/8 and Boeing added 1/2 to 47 3/8, but Ford slid 1 to 61 1/2 and Rockwell lost 1 1/2 to 41.
* Drug stocks rose as takeover rumors dogged downtrodden Syntex again. Syntex jumped 7/8 to 14 5/8, Pfizer added 3/4 to 57 3/8 and Bristol-Myers rose 1/2 to 55 3/4.
* Bank stocks attracted buyers on talk that Congress will pass a law in 1994 allowing banks to expand nationwide. Citicorp rose 3/4 to 41 1/8, First Chicago leaped 2 3/4 to 49 7/8, First Interstate gained 2 1/2 to 69 and Banc One was up 5/8 to 33 1/2.
In Europe, stocks were mixed after slumping Thursday on worries about Russia. London’s FTSE-100 index added 13.7 points to 3,281.2, but Frankfurt’s DAX index fell 15.37 points to 2,074.92.
In Tokyo, the Nikkei index added 37.90 points to 19,803.38. After a rough week, Mexico City’s Bolsa index rose 4.06 points to 2,596.39.
Bond yields showed little change after Thursday’s surge. The 30-year Treasury bond yield closed at 6.71%, down slightly from Thursday’s eight-month high of 6.73%.
Since the Fed raised short-term interest rates Feb. 4 to restrain the economy, the 30-year bond yield has jumped more than a third of a point.
Traders say many investors are selling bonds not because of inflation worries related to the strong economy, but simply because the Fed’s action was viewed as a clear signal that the long downtrend in rates is over.
Bonds could face more pressure next week: A survey of Midwest purchasing managers is due Monday, followed by a national purchasing managers survey Tuesday. If the reports confirm a robust economy, the Fed could boost rates again, analysts say.
* Gold gained on the Comex, with the near-term futures contract up $2.20 an ounce to $378.60. Silver added 5.4 cents to $5.23.
* Light, sweet crude oil for April delivery fell 20 cents to $14.57 a barrel.
Market Roundup, D4
Selected Interest Rates
Averages of daily rates ended Thursday, in percent.
Corporate AAA bonds: 7.15%
90-day CDs: 3.51%
3-month Treasury bills: 3.34%
Bank prime rate: 6.00%
Municipal bonds: 5.42%
Federal funds rate: 3.25%
Discount rate: 3.00%
Source: Federal Reserve Board