Most Stocks Close Higher as Wall Street Awaits Jobs Report
Stock prices rallied modestly Thursday, boosted by lower bond yields, but investors stayed pretty much on the sidelines ahead of today’s employment data for May.
In the bond market, yields fell on both short- and long-term issues, responding to new economic reports suggesting a slowdown in the economy.
At the close, the 30-year Treasury bond yield was at 7.34%, down from 7.39% on Wednesday. The one-year T-bill yield dropped to 5.27% from 5.36%.
On Wall Street, advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, a healthy ratio. But the Dow industrial average eased 1.84 points to 3,758.99, hurt by declines in IBM and Sears shares.
Trading in both stock and bond markets was moderate, which analysts said was a reflection of investors’ nervousness about today’s employment report.
“After being burned the past couple of months by the employment figures, investors are a little gun-shy about making big bets before the numbers come out,” said James Solloway, research director at Argus Research Corp.
Even so, the bond market was clearly heartened by economic reports Thursday pointing to slower growth.
The Commerce Department said its chief forecasting gauge, the index of leading economic indicators, was unchanged in April and that orders to U.S. factories declined 0.1% in April, the second drop in three months.
A strengthening in the dollar was also cited by some traders as helping bonds.
The dollar broke out of a narrow range against the German mark, fetching 1.653 marks in New York, up from Wednesday’s 1.645.
Some traders attributed the rise to technical factors and optimism about today’s employment figures. In any case, a stronger dollar encourages foreign investors to buy U.S. securities.
Analysts also said overseas investors were rumored to be moving into the U.S. bond market to escape the recent turmoil in European bonds, where yields have been surging on expectations of renewed economic growth.
“People think there’s money coming back home from abroad,” said James McGroarty, managing director at Athena Global Investments in Greenwich, Conn.
Yet in London on Thursday, bond yields finally pulled back from their recent highs, falling nearly one-third of a percentage point as buyers rushed in.
“With yields near 9%, even if inflation pushes toward 4% next year, that equates to 5% real yields,” said Chris Anthony, head of bond research at ABN Amro Hoare Govett Sterling Bonds Ltd.
The improvement in the British bond market helped push the FTSE-100 stock index in London up 48.9 points to 2,980.80.
Paris shares also rallied, with the CAC index up 27.70 points to 2,007.38. The Frankfurt market was closed for a holiday.
In Tokyo, the 225-share Nikkei average ended down 44.11 points at 21,009.00, after having climbed as high as 21,198.74, topping its best level of 1993.
In Mexico City, the Bolsa index added 7.08 points to 2,446.06.
Among U.S. market highlights:
* Retailers’ stocks reacted to May sales reports. Sears fell 1 3/4 to 50 despite reporting an 8.8% rise in May same-store sales, or sales at stores open at least a year.
J.C. Penney was also lower, down 2 to 49 3/4 after saying same-store sales rose 5%.
Among retail winners were Circuit City, up 1 1/2 to 21 1/4; Good Guys, up 1 1/4 to 13 1/4, and Nordstrom, up 3/4 to 43 3/4.
* IBM fell 1 1/2 to 62 after brokerage Dean Witter downgraded the stock to “neutral” based on its recent price appreciation.
* Many financial stocks continued to rally. Ahmanson gained 5/8 to 19 3/8, California Federal Bank rose 1/2 to 12, Coast Savings jumped 1 to 16 and First Chicago added 1 to 54 1/4. Banking shares generally gain when investors expect interest rates to moderate.
* Some industrial issues rebounded, including Caterpillar, up 1 1/8 to 106 5/8; Clark Equipment, up 1 3/8 to 65 5/8, and Ameron, up 1 3/4 to 37 7/8. Also, engineering giant Fluor jumped 2 to 53 3/4 on strong second-quarter earnings.
* U.S. Surgical dropped 2 to 19 3/4 on investor disappointment after Swiss drug and chemical giant Ciba-Geigy said it has no intention of acquiring the firm. U.S. Surgical had climbed 2 3/4 on Wednesday amid takeover speculation.
* Among telecommunications issues, IDB Communications gained 1 3/16 to 8 5/16 after losing half its value Wednesday in the wake of its auditors’ resignation.
Newbridge Networks slumped 3 1/4 to 39 1/2. An analyst’s report sparked rumors that a Federal Communications Commission ruling was going to take a bite out of equipment sales to Nynex Corp.
Newbridge, however, said the FCC ruling was old news and would have little impact.
Meanwhile, in the precious metals market, gold rose on the New York Comex to $384.20 an ounce, up 70 cents. Silver fetched $5.369, up from $5.333 on Wednesday.
In other commodity trading, the volatile coffee market caught another wave of buying from the continued decline in coffee stockpiles. July coffee futures rose 3.25 cents to $1.26 a pound at the Coffee, Sugar and Cocoa Exchange.
“A lot of (coffee) producers say it’s getting too high, which could mean a return to the boom-bust syndrome,” one trader warned.
Brazil’s ambassador to Britain, Rubens Barbosa, told reporters that further sharp rises would harm producing countries.
Prices have doubled this year to seven-year highs.
Grain markets were relatively quiet, as the long-term forecast for dry weather was offset by heavier-than-expected rains Wednesday night in key growing areas.
July soybeans ended 1 cent lower at $6.99 1/2 a bushel, July corn was unchanged at $2.81, and July wheat gained 2 cents to $3.31 a bushel.
Market Roundup, D6
