FINANCIAL MARKETS : Dow Manages 9-Point Gain on Listless Day; Yields Rise
Blue chip stocks rose Monday in a rally led by companies linked to the fortunes of the economy, but bond prices fell on fears that inflation may be on the rise.
The Dow Jones industrial average rose 9.67 points to 3,783.12. Advancing issues narrowly outnumbered decliners on the New York Stock Exchange. Big Board volume came to 243.38 million shares, up from 222.61 million on Friday.
The market managed to rally despite a drop in the shares of Exxon Corp. A federal jury found that recklessness by the nation’s largest oil company helped cause the worst U.S. oil spill and opened the company up to punitive damages. Exxon was off 2 1/2 at 59 5/8 in heavy trading of more than 3.5 million shares.
Sharply lower foreign stock prices helped set the day’s negative tone, and major stock indexes traded in a narrow, mostly lower range.
Mexico City’s Bolsa index plunged 94.43 points, or 3.96%, to 2,291.12. It was the biggest one-day decline since April 20, when stocks fell 5.2% after a surge in interest rates.
In Europe, stocks were apparently hurt by economic reports hinting at future inflation. Frankfurt’s 30-share DAX average fell 27.30 points to 2,105.78, while London’s Financial Times 100-share average ended at 3,016.3, down 39.6 points.
However, in Tokyo, the key 225-share Nikkei average closed at a new 1994 high, finishing up 157.63 points at 21,552.81.
Meanwhile, in the Treasury bond market, yields traded higher, pushing prices lower. Treasuries, analysts said, responded in part to comments by Federal Reserve Board Gov. Susan Philips, who was quoted as saying inflationary pressures are emerging in commodity markets.
The yield on the 30-year bond rose to 7.35% from Friday’s 7.31%, pushing its price, which moves in the opposite direction, down 15/32 point, or $4.69 per $1,000 in face value.
Stock investors don’t like to see interest rates rise, because that increases the cost of money to corporations and makes shares less attractive relative to interest-bearing investments.
“The market’s listless,” said Bill Allyn, managing director at Jefferies & Co. “Portfolio managers are pretty much where they want to be and are waiting for direction from earnings or economic news.”
Many investors, analysts said, turned their attention to economic data due out this week, including today’s report on consumer prices.
Another factor contributing to the relatively light volume, analysts said, was Friday’s quarterly expiration of stock index options and futures and options on individual stocks. Trading is often light ahead of the portfolio adjustments, they said.
Investors bought the stocks of companies that benefit most from an expanding economy, such as paper, autos and chemicals, and that buoyed the Dow industrials.
Among the market highlights:
* Alcoa rose 2 1/4 to 75 1/4, while UAL, the parent of United Airlines, rose 2 3/8 to 119.
* PepsiCo rose 1/4 to 31 3/8 and Coca-Cola lost 7/8 to 39 3/8. Pepsi warned late last week of a cola price war and forecast second-quarter results that were below market expectations.
* Among blue chip cyclicals, Caterpillar gained 7/8 to 106. DuPont added 1 1/8 to 61 3/4.
* Quincy Savings rose 6 11/32 to 23 27/32 after a Royal Bank of Scotland unit said it would buy the company for $139.9 million.
* Auto stocks, also considered cyclicals, were strong for the second straight session. Ford climbed 1 3/4 to 58 7/8; General Motors finished up 3/4 to 52 1/8; Chrysler climbed 1 1/2 to 48 1/2.
* Computer giant IBM said it cut prices on some local area network servers. Its stock rose 1 1/8 to 63 3/4.
* Telefonos de Mexico dropped 2 1/8 to 58 3/4 along with other Mexican stocks in U.S. trading after Indian rebels in southern Mexico rejected a peace accord.
Meanwhile, in the currency market, the dollar slid as investors flocked to the German mark in the wake of a ruling-party victory in European parliamentary elections.
The dollar closed in New York at 1.647 German marks, down from 1.667 on Friday.
The dollar fetched 102.85 Japanese yen, down from 103.50 on Friday.
In commodities trading, coffee prices soared close to levels last seen in the late 1980s after the government projected a decline in output.
Coffee for July delivery jumped 13.10 cents to $1.383 a pound on the New York Coffee, Sugar and Cocoa Exchange.
Crude oil futures surged to their highest levels in nearly eight months on the New York Merc, spurred by continued oil shortages in the Midwest.
Light, sweet crude for July delivery jumped 31 cents to $18.79 a barrel.
Market Roundup, D8
