FINANCIAL MARKETS : Stocks, Yields Climb; Dow Gains 31.29
Stocks rose strongly Monday as the market continued to recover from last week’s sharp decline, while bond yields rose.
The Dow Jones average gained 31.29 points to 3,739.56. In the broader market, advancing issues narrowly outnumbered declining ones on the New York Stock Exchange, where volume was 265.49 million shares against Friday’s 118.29 million shares. Friday’s session ended early because of the Thanksgiving holiday.
Broader indexes were lower and reflected investors’ continued concern, analysts said. The NYSE’s composite index rose 0.86 point to 248.46; Standard & Poor’s 500-stock index rose 1.87 points to 454.16. The Nasdaq composite index rose 3.21 points to 745.73, but at the American Stock Exchange, the market value index fell 1.10 points to 433.59.
Mexican stock prices also ended sharply higher as investors bet on a smooth transition of political power later this week, traders said. The Bolsa index shot up 77.66 points to 2,562.83.
President Carlos Salinas de Gortari is due to hand over the office to Ernesto Zedillo on Thursday.
In New York, stocks seesawed. Trading lacked any pattern after the 137-point plunge in the Dow average early in last week and a 33-point rebound on Friday.
“It’s a leaderless market,” said David Holt, director of technical research at Wedbush Morgan Securities. “There is no compelling reason to go out and buy a bunch of stocks.”
With little news to guide investment decisions, most of the buying was done by market players snapping up issues that had fallen sharply and were considered fairly priced, analysts said.
“There were some bargain hunters with no great conviction,” said Michael Metz, investment strategist at Oppenheimer & Co. “Investors are still frightened.”
With the outlook for equities uncertain and interest rates rising, many stock investors have fled to bonds in search of better returns. This prompted bond prices to rise last week, pushing down interest rates.
Treasury bond yields rose for the first time in a week as news of strength in holiday shopping and housing rekindled inflation worries. The main 30-year bond yield closed at 7.98%, up from 7.94% on Friday. Its price, which moves in the opposite direction, dropped 7/16 point, or $4.38 per $1,000 in face value.
Major retailers reported that consumers scooped up jewelry, big-screen TVs and other top-dollar items in the burst of unexpectedly strong buying.
The National Assn. of Realtors reported that sales of previously owned homes inched up 0.5% to 3.91 million in October, amid rising mortgage rates. It was the first advance in three months.
Bond investors dislike word of strength in the economy because it carries the risk of inflation, which erodes the value of fixed-income securities such as Treasuries.
And stock investors don’t like to see interest rates rise because that makes shares less attractive than interest-bearing investments and increases the cost of borrowing for companies.
Many investors are awaiting a better definition of the economy’s direction before jumping back into stocks, analysts said.
Other overseas stocks were also higher. Tokyo’s 225-share Nikkei average closed up 144.43 points at 18,811.36. In Europe, Frankfurt’s 30-share DAX average closed at 2,058.45, up 6.83 points. And in London, the Financial Times 100-share average rose 13.6 points to 3,047.1.
Among the market highlights:
* United Technologies Corp. rose 1 1/4 to 57 3/4 and Du Pont Co. added 7/8 to 53 3/8.
* Telefonos de Mexico rose 2 1/2 to 54. The shares rallied with other Mexican issues as the Mexican stock market moved sharply higher. Grupo Tribasa rose 3 1/8 to 33 7/8.
* America Online rose 4 1/8 to 40 7/8. The company completed a two-for-one stock split of its common shares.
* Some retailers rose after solid Thanksgiving weekend sales. Kmart Corp. rose 3/8 to 14 1/2; Limited Inc. gained 7/8 to 20 1/8.
* J.C. Penney Co. said its store sales rose in the low single digits in percentage terms last week. Its shares fell 2 1/4 to 46 1/4.
* Pfizer Inc. rose 1 5/8 to 75 1/8. Pfizer and Japan’s Eisai Co. Ltd said they have agreed to develop new drugs for the treatment of Alzheimer’s disease.
* Musicland Stores Corp. fell 1 3/8 to 11 after analysts downgraded the stock, citing recent pricing and promotional actions that could trim profits.
* Automotive Industries Holdings Inc. shed 3 1/4 to 16 1/2. It was one of five automotive original equipment suppliers that Salomon Bros. downgraded to “hold” from “buy.”
Meanwhile, the dollar reached the highest level against the German mark in nearly three months Monday, drawing strength from higher U.S. interest rates, a stock rally and Norway’s apparent rejection of European Union membership.
In New York, the dollar fetched 1.567 marks, up from 1.559 marks Friday and the highest level since Sept. 1. The dollar traded at 98.68 Japanese yen, down from 98.81 yen on Friday.
Market Roundup, D8
