Your Money : Stock, Bond Markets Buoyed as Commodity Prices Recede
Stocks and bonds rallied Thursday as lower commodity prices relieved the markets of their latest inflation worries.
Blue chip stocks racked up strong gains, lifted by a rally in the shares of Exxon Corp. and nervous buying ahead of today’s options expirations. After losing more than 24 points on Wednesday, the Dow Jones industrial average gained 20.93 to close at 3,811.34, with 256.39 million shares changing hands.
The yield on the bellwether 30-year Treasury bond fell back to 7.35% from Wednesday’s 7.39% on falling commodity prices, despite stronger-than-expected housing data that tended to push bonds yields higher. Short- and intermediate-term yields retreated as well. The long bond’s price, which moves in the opposite direction, was up 3/8 point, or $3.73 per $1,000 in face value.
On Wall Street, advancing issues outnumbered decliners by about 11 to 9 on the New York Stock Exchange.
Other indexes tied to NYSE stocks were also higher. The NYSE composite gained 0.85 to 254.99 while the Standard & Poor’s 500-stock index gained 1.32 to 461.93.
The Nasdaq index of mostly smaller firms lost 0.87 to 734.97, while at the American Stock Exchange the market value index was down 0.49 to 441.78.
“I suspect a lot of the decent activity in blue chips is a function of options expiration Friday,” said Joseph Battipaglia, chief investment strategist at Gruntal.
The “triple witching” expiration of equity and index options and index futures often brings fluctuations in stock prices as groups of widely held shares are bought or sold in relation to stock index futures and options.
On Thursday, Exxon, one of the 30 components of the Dow index, bounced back 1 7/8 to 58 7/8, helped by an upgrade from Goldman Sachs.
Bond prices were bolstered by a drop in the price of grains and other commodities, which had spiked Wednesday. The Commodities Research Bureau index, a gauge of daily changes in various commodities, dropped 1.33 points to 237.28. The index surged 3.31 points on Wednesday.
The increase reversed a slide in bond prices that began early in the day when the government reported housing construction was up 2.6% in May.
Analysts had expected higher mortgage rates to depress housing starts.
The increase was interpreted as a sign of economic growth, which carries the threat of inflation and often causes investors to sell fixed-income securities. Inflation erodes the value of these investments.
Bond prices began to turn around markedly in the early afternoon on a number of factors, the most important being the softening of commodity prices.
Among Thursday’s market highlights:
* Entergy fell 2 3/4 to 26 3/8 after it told analysts it was facing “an increasingly competitive environment.”
* Hasbro lost 3 to 28 1/2 after saying it expects second-quarter results to fall below a year ago.
* Renal Treatment Centers tumbled 3 to 17 after it predicted second-quarter earnings would fall shy of analysts’ estimates, citing unusually high operating costs.
* Bank stocks continued a recent decline. First Chicago lost 2 1/4 to 50 3/4 and NationsBank was off 1 1/8 to 54 1/4.
* Computer stocks kept the Nasdaq weak. AST Research was down 1 1/4 to 14. Dell Computer was off 1 1/16 to 26 7/8. Apple lost 1 7/16 to 26 3/8.
Stocks were mixed in overseas trading. In Europe, Germany’s 30-share DAX average ended at 2,054.91, down 19.79 points, while in London, the Financial Times 100-share average closed off 15.7 points at 3,030.1
Tokyo’s 225-share Nikkei average ended up 84.51 points at 21,367.47 and Mexico City’s Bolsa index rose 29.93 points to 2,326.80.
Meanwhile, the dollar rose against the Japanese yen amid aggressive intervention by the Bank of Japan and jitters about a U.S.-North Korean conflict.
After dipping 0.16 yen to 102.87 in Tokyo, where the trading day begins, the dollar rose in New York to 103.25 yen, up from 102.65 late Wednesday.
The dollar fell to its lowest level this year against the German mark and Swiss franc in Europe and continued to drop when trading shifted to U.S. markets. But profit taking and concerns of possible dollar-supporting intervention by the Federal Reserve and other central banks helped slow the slide. It closed at 1.632 German marks, down from 1.636, and at 1.370 Swiss francs, down from 1.3705.
Market Roundup, D5
