FINANCIAL MARKETS : Stocks Gain, Bonds Largely Unchanged
Despite being pressured by nagging inflation worries, stocks ended mostly higher Friday and bond yields were largely unchanged.
Stocks sagged early in the day in tandem with bond prices, as the dollar took another dive on worries about deteriorating U.S. trade relations with Japan.
When the dollar stabilized in the afternoon, however, stocks and bonds improved as well.
The Dow Jones industrial average closed at 3,755.11, off 0.32 point for the day and down 13.6 points for the week.
In the broad market, advancing issues edged out decliners Friday by about 11 to 9 on the New York Stock Exchange, and many key indexes were modestly higher.
In the bond market, the yield on the Treasury’s 30-year bond closed unchanged at 7.48%, after rising above 7.50% early in the day.
The dollar wound up at 98.65 Japanese yen late in New York, up from 98.58 on Thursday, though it edged lower against the German mark, to 1.539 from 1.543.
The dollar, which had traded above 101 yen a week ago, began to sink again last week on news that Japan’s trade surplus with the United States ballooned in June. Currency markets fear that the Clinton Administration will once again resort to bashing the dollar to bring the surplus down.
A lower dollar could also boost the price of imports entering the United States, thus fueling inflation.
Alan Ackerman, analyst at Reich & Co. in New York, said the view on Wall Street that President Clinton has been weakened politically in Congress also weighs on the dollar, because it saps confidence in America.
“The dollar is selling with a Clinton discount,” Ackerman said.
Robert Stovall of Stovall/Twenty-First Advisers said the dollar’s health is a major concern because a weak currency discourages foreign investors from buying U.S. stocks and bonds. Every time the dollar loses ground, foreigners’ U.S. assets are depreciated.
Among the stock market highlights:
* Selected technology issues continued to lead the market. IBM rocketed 1 7/8 to 68 1/8, its highest level since December, 1992, after S.G. Warburg analyst David Wu raised his target price on the stock to between 80 and 85, from 75.
Wall Street has been growing increasingly optimistic about IBM’s turnaround.
* Among other tech issues, software firm Autodesk surged 8 1/2 to 58 1/4 after it posted sharply higher quarterly earnings. Other tech winners included Powersoft, up 1 3/8 to 43 1/4; Cheyenne Software, up 1 1/8 to 10 5/8; Xircom, up 3/4 to 18 and Hewlett-Packard, up 1/2 to 87 7/8.
* Some industrial issues bounced back from recent profit taking. Union Carbide gained 1/2 to 32 1/4, Cooper Industries added 1 to 38 7/8, Nucor surged 2 1/8 to 68, Inland Steel was up 1 1/4 to 38 1/2, Inco added 1/4 to 26 5/8 and Emerson Electric jumped 1 3/8 to 62 1/4.
* Food and drug stocks, which had led the market all week, turned mixed. Johnson & Johnson gained 7/8 to 49 and Hershey Foods jumped 1 3/8 to 47 1/8, but Kellogg lost 1 1/8 to 55 1/2 and Bristol-Myers was off 1/2 to 57.
* Health care provider Caremark rocketed 2 3/8 to 25, but the company said it had no news and declined to comment further on the activity.
In foreign markets, worries about U.S.-Japan trade issues sent the Nikkei-225 index down 350.07 points to 20,512.70 in Tokyo.
In Frankfurt, the DAX index eased 3.99 points to 2,149.57, while London’s FTSE-100 index added 8.8 points at 3,191.4.
In Mexico City, the Bolsa index rose 9.87 points to 2,708.11, awaiting Sunday’s presidential election.
In U.S. commodities trading, gold futures ended firmer, continuing higher after Thursday’s rally. December gold added $1 to $386.90 an ounce after hitting a two-week high of $385.30.