Yields Ease as Grains Take a Break
Bond yields closed slightly lower Tuesday as the latest surge in commodity prices gave way to some profit taking.
Stocks, encouraged by the bond market and by a stronger dollar, also rallied.
Rain in the Midwest drove soybean futures prices down sharply Tuesday, triggering steep declines in many other commodity prices one day after a broad advance.
The Commodity Research Bureau index of 21 agricultural and industrial commodities, which had rocketed 4.67 points on Monday to its highest level since October, 1990, gave back 3.67 points to 234.69 on Tuesday.
Agriculture Department meteorologist Norton Strommen said the rain this week in the central and eastern Corn Belt will improve crop prospects threatened by a severe lack of moisture over the past six weeks.
In Chicago, July soybean futures tumbled 37.25 cents to $6.95 a bushel at the Board of Trade. July corn sank 8 cents to $2.67 1/4, July wheat fell 7 cents to $3.29 3/4, and July oats declined 4 cents to $1.23 1/4 a bushel.
Gold followed grains lower: June gold futures dropped $2.60 to $387.30 an ounce on the New York Merc. Oil prices also eased.
In the bond market, the yield on 30-year Treasury bonds, which had jumped from 7.30% to 7.43% on Monday, plunged at the opening as commodities fell.
But the bond rally ebbed as the day wore on. At the close, the T-bond yield was 7.39%.
Traders expressed some disappointment over the Treasury’s auction of $17 billion in two-year notes Tuesday. The high yield for the notes was 5.94%, the highest since October, 1991.
The Treasury will sell new five-year notes today.
Meanwhile, news that the United States and Japan will resume formal trade talks sent the dollar up against most major currencies Tuesday.
In New York the dollar climbed to 104.65 Japanese yen from 104.36 yen Monday. Against the German mark, the dollar was quoted at 1.655 marks, up from 1.645.
On Wall Street, stocks moved ahead, tracking the bond market’s rebound and the stronger dollar.
Profit taking in some blue chips restrained the Dow industrial average, which settled for a slim gain, adding just 2.76 points to 3,745.17.
Broader market measures fared better. The Standard & Poor’s 500 index rose 1.62 points to 454.81, and the Nasdaq composite index of mostly smaller stocks jumped 6.52 points to 731.47.
On the Big Board, advancing issues beat losers by 12 to 9. Volume on the NYSE floor totaled 280 million shares, up from 249 million Monday.
Among the market highlights:
* Industrial stocks hit by profit taking included Caterpillar, off 2 1/4 to 108 1/4; Deere, down 2 3/8 to 71 5/8, and Alcoa, off 1 to 69 5/8.
* Also on the downside, CBS plunged 18 to 270 after falling 15 1/2 on Monday on news it is losing eight television affiliates to rival News Corp.’s Fox Network. Goldman Sachs removed CBS from its recommended list, citing the loss of the affiliates.
Also falling was Cap Cities/ABC, off 17 3/4 to 735 1/2, while News Corp. jumped 2 to 54 7/8 and New World Communications, the beneficiary of the defecting stations, soared 2 1/8 to 12 3/4.
* Among the day’s winners, many tech stocks rebounded. IBM jumped 1 3/8 to 63 1/8, AST Research gained 1 1/2 to 16 3/4 and Dell Computer shot up 3 to 29. Dell posted solid first-quarter earnings.
* Medical Care America soared 3 7/8 to 27 1/4 on its plan to merge with Columbia/HCA Healthcare, which fell 5/8 to 39 1/8. Also in the health care area, Merck added 5/8 to 30 7/8 after trading as high as 32 1/4. The resignation of the head of Merck’s Medco unit fueled speculation about who will be named Merck’s new CEO.
Foreign markets were mixed. Frankfurt’s DAX index tumbled 50.93 points, or 2.3%, to 2,198.72, reacting to news of a 15.8% rise in Germany’s April money supply and comments by Bundesbank President Hans Tietmeyer ruling out “for the time being” more interest rate cuts.
In London, the FTSE-100 index fell 19.3 points to 3,089.1, while Tokyo’s Nikkei average finished up 53.41 points at 20,622.12.
Mexico City’s Bolsa index gained 37.09 points to end at 2,468.52, the session high.
