FINANCIAL MARKETS : Dow Listless; Treasury Bill Yields Rise
Stocks and bonds treaded water Monday as investors hesitated ahead of a possible interest rate hike.
The Dow Jones industrial average bobbed near unchanged levels during most of the day until a selling wave dragged it under slightly toward the close. The blue chip indicator finished at 3,760.29, down 8.42 points.
Program selling also depressed broader indicators. The New York Stock Exchange composite index dipped 0.25 points to 254.52 and Standard & Poor’s 500 fell 0.71 points to 461.23.
In the broader market, advancing and declining stocks were separated by only a handful of stocks on the Big Board where the trading pace slowed to 223.57 million shares from 249.28 million on Friday.
Smaller stocks also marked time through the uneventful session. The Nasdaq composite index inched up 1.28 points to 732.89.
The listless session on Wall Street reflected an unwillingness by market professionals to act aggressively on the day before what could be a crucial meeting of the Federal Reserve Board’s policy-setting panel.
Long-term Treasury bond yields were unchanged at 7.50% in extremely slow trading as players made minor portfolio adjustments ahead of an expected rate hike by the Fed. However, the 30-year bond’s price fell 3/32 point, or 94 cents per $1,000 in face value.
But yields on Treasury bills, which stand to be hurt most by a hike in short-term rates, shot higher as traders braced for the Fed’s expected decision to push up a key rate at its policy-making meeting today. Other maturities were mixed.
Bond prices headed lower after the Fed reported that output at the nation’s factories, mines and utilities advanced 0.2% in July, slightly higher than expected.
The report added to sentiment that economic growth, despite slowing in recent months, remained somewhat stronger than Fed policy-makers feel comfortable with.
Most economists and market strategists believe the Fed will decide to push up its target for the federal funds rate--what banks charge each other on overnight loans--by a quarter of percentage point to 4.75%, to ease economic growth and prevent inflationary pressures from building.
While the increase in output at the nation’s factories, mines and utilities was a bit stronger than estimated, the report was consistent with recent evidence suggesting that economic growth remains vigorous enough to induce the central bank to raise short-term interest rates for the fifth time this year.
Release of the industrial production figures incited a brief flurry of selling in the bond market, where modest price gains were temporarily replaced by modest losses.
But by late in the day, the selling had subsided and the price of the key 30-year Treasury bond had mostly recovered.
Among stock market highlights:
* American Cyanamid fell 1 7/8 to 90 7/8. Suitor American Home Products said late in the day that it would raise its $95-a-share offer to $100 if Cyanamid agreed to a friendly transaction.
* A growing belief that efforts to change the nation’s health care system are moving along slowly buoyed companies in the drug group, traders said. Merck gained 7/8 to 33 1/8, and Johnson & Johnson rose 7/8 to 49 1/2.
* Gensia rose 2 3/4 to 12 1/4 after an Alex. Brown analyst said completion of clinical trials for the firm’s drug to treat heart attacks is positive, and a source said Hambrecht & Quist also had positive comments.
* Syntex rose 1/8 to 21 7/8 after attracting interest as Roche Holding denied speculation that it might scrap its $5.3-billion bid for Syntex.
* Bell Atlantic fell 1 to 56 5/8 after announcing that it will eliminate 5,600 jobs and revamp accounting methods in cost-cutting moves intended to make the telecommunications company more competitive. The measures will result in a $2.3-billion charge against third-quarter earnings.
* Kmart gained 1/4 to 17 1/8 after posting lower earnings.
* Viacom Class B shares were up 1/8 to 36 1/8. The stock was active as the multimedia and entertainment company reported quarterly results.
* Takeover news stirred interest in one Amex-listed issue, Sundowner Offshore Services. The stock soared 2 5/8 to 16 5/8 in heavy trading after Nabors Industries said it has agreed to acquire Sundowner in a stock swap. Nabors was the volume leader on the Amex, rising 1/8 to 6 1/2.
Featureless sessions on foreign markets failed to inspire much reaction at home.
In Mexico City, the Bolsa index closed up 13.74 points at 2,651.5. Frankfurt’s 30-share DAX average ended up 14.16 points at 2,138.84, while Tokyo’s 225-share Nikkei average ended down 37.50 points at 20,626.33. London’s Financial Times 100-share average fell 0.1 point to 3,142.2.