Stocks Fairly Steady Despite New Rate Rise
Bond yields took another leap higher Thursday, but the stock market held relatively firm, boosted by buying of heavy-industry issues and smaller stocks.
In the bond market, the yield on the Treasury’s benchmark 30-year bond zoomed to 6.83%, the highest since mid-June, from 6.77% on Wednesday.
The Dow industrial average, however, closed off just 7.32 points at 3,824.42, and indexes of smaller stocks gained slightly on the day.
Traders said the latest selloff in the bond market was sparked by another round of inflation worries, this time triggered by the threat of U.S. trade sanctions against Japan.
Investors fear that any U.S. action that raises the cost of Japanese exports to America could boost inflationary pressures in the already robust U.S. economy.
But even discounting the U.S.-Japan issue, it isn’t surprising that potential bond investors continued to avoid the market Thursday, experts say: The market’s deepest fear is that the Federal Reserve Board will soon boost short-term interest rates a second time, to demonstrate its resolve to rein in the domestic economy.
The Fed’s hand could be forced by today’s report on February employment. A larger-than-expected gain in jobs could give the central bank the excuse it needs to tighten credit another notch.
Although the bond market should eventually cheer the idea of a cooled-down economy, many traders say investors are showing no signs of stepping up to buy bonds, despite the surge in yields over the past month.
In the stock market, however, bargain hunters were out in force for a second day Thursday, providing hope that stock investors are beginning to look more to the positive aspect of rising corporate profits than to the negative of higher interest rates.
Losing issues outnumbered winners by just 5 to 4 on the New York Stock Exchange on Thursday, versus a 2-1 margin Wednesday. And in the Nasdaq market of mostly smaller stocks, winners actually edged losers Thursday.
Buyers focused on some heavy-industry issues that should fare best in a stronger economy. Winners included Bethlehem Steel, up 7/8 to 21 1/4; Scott Paper, up 3/4 to 45 3/4; Bearings, up 3/4 to 33 1/2; Fluor, up 2 3/4 to 47 1/2, and Clark Equipment, up 1 5/8 to 61 5/8.
Among other market highlights:
* Auto stocks closed mixed after rallying early on news of strong recent car sales. Chrysler rose 5/8 to 58, but Ford slipped 1/4 to 63 5/8 and GM was unchanged at 60 1/2.
* A rally in technology stocks helped buoy the Nasdaq market. Intel surged 1 3/8 to 68, Dell Computer zoomed 2 1/8 to 27, Cisco Systems gained 1 1/2 to 76 3/4 and Xircom was up 3/4 to 26 1/2.
* Energy stocks also saw demand. Chevron rose 1 1/2 to 88 3/4, Unocal added 1/2 to 27 3/4, Ashland Oil gained 1 to 42 and Sonat rose 1/2 to 30 1/2.
* On the downside, many financial stocks continued to decline, victims of rising interest rates. Federal National Mortgage fell 1 1/4 to 80 7/8, Bankers Trust slid 2 to 76 1/2, Merrill Lynch lost 3/4 to 40 and NationsBank dropped 3/4 to 47 1/8.
* Among Southland issues, Cheesecake Factory plunged 3 5/8 to 29 3/8 after the restaurant chain reported disappointing earnings.
Also, DEP Class A shares closed unchanged at 4. The personal products firm sued S.C. Johnson & Son, alleging that Johnson wrongfully altered its marketing and sales practices prior to the closing of its sale of the Agree and Halsa trademarks to DEP last August.
Overseas, markets tried to stabilize. London’s FTSE-100 index eased 1.6 points to 3,246.5. Frankfurt’s DAX index gained 17.57 points to 2,037.90.
In Mexico City, the Bolsa index closed off 0.75 point to 2,561.93, despite an early rally.
In commodity markets, President Clinton’s threat to impose trade sanctions against Japan reverberated through the grain markets Thursday, sending prices to three-month lows.
At the Chicago Board of Trade, March wheat futures fell 2.75 cents to $3.39 1/4 a bushel, the lowest prices since Nov. 10. March corn dropped 4.75 cents to $2.78 3/4 a bushel, and March soybeans lost 10.75 cents to $6.65 3/4.
In currency trading, the dollar fell against the yen, slipping to 103.77 in late New York trading from Wednesday’s 104.20, on worries about trade relations.
