FINANCIAL MARKETS : Mood Report Boosts Yields; Dow Slips 1.01
Bond yields rose sharply Tuesday as a reported surge in consumer confidence revived fears of inflation. The dollar rose broadly as the outlook for higher rates attracted foreign funds.
Blue-chip stocks, after a two-session rebound, closed with slight losses, although the broader market edged upward.
Interest rates rose for a second day after the economic confidence evident from the first holiday shopping weekend got some scientific backing from the Conference Board’s monthly survey.
The Conference Board said consumer confidence in the economy rose sharply in November, to a four-year high mark. The business-research group’s Consumer Confidence Index climbed last month to 101.3 from a revised 89.1 in October.
With people feeling so good about the economy, bond traders figured the Federal Reserve might again push up interest rates to slow it down.
The yield on the Treasury’s bellwether 30-year bond rose to 8.03% from 7.98% Monday. Its price, which falls when rates rise, closed down 17/32 point, or $5.31 per $1,000 in face value.
In the currency market, the dollar rose broadly and reaching its highest level against the yen since mid-October. The rally inspired by positive news about the U.S. economy and a Fed banker’s hints of further upward pressure on interest rates.
In New York, one dollar fetched 98.97 Japanese yen, up from 98.68 yen late Monday. The dollar also rose in relation to the German mark, to 1.571 marks from 1.567 marks Monday.
On Wall Street, technology issues, which were hit hard in the market’s recent downturn, moved higher.
The Dow Jones industrial average slipped 1.01 points to 3,738.55, but rising issues narrowly outnumbered declining ones on the New York Stock Exchange.
Bond investors don’t like to hear of economic growth because it can bring inflation, which erodes the value of fixed-income securities.
And high interest rates worry stock investors because they make shares less attractive relative to interest-bearing investments and increase the cost of money to companies.
Stocks ended mixed abroad. In Tokyo, the 225-share Nikkei average ended up 115.13 points at 18,926.49 as did London’s Financial Times 100-share average, which gained 14.0 points to close 3,061.1. Frankfurt’s DAX 3-share average finished at 2,044.28, off 14.17 points.
Mexico City’s Bolsa index closed 33.33 points higher at 2,596.16.
The NYSE’s composite index rose 0.44 point to 248.90. The Standard & Poor’s 500-stock index rose 1.01 points to 455.17, while the Nasdaq composite index--heavily weighted in technology stocks--rose 5.75 points to 751.48.
Among the market highlights:
* Among technology issues on Nasdaq, Lotus Development rose 1 1/4 to 41 3/4; Sybase Inc. gained 2 1/2 to 49 1/2 and Powersoft Corp. jumped 3 1/8 to 75 5/8. America Online rose 2 7/8 to 43 3/4.
* American Brands said it was talking about selling Franklin Life Insurance to American General. American Brands ended 3/8 higher at 34 3/8 and American General slipped 1/8 to 26.
* MC I Communications Corp. dropped 1 1/2 to 19. Merrill Lynch lowered its near-term and long-term ratings of the stock, citing slowing expansion of MCI’s long-distance business.
* Boeing finished 1/4 off at 44 1/4 and McDonnell Douglas rose 7/8 to 138 1/2 after the two aerospace companies announced they would join forces to land contracts for building the next-generation space shuttle.
* Federated Department Stores rose 1 to 20 3/8 amid news that shareholders had approved the chain’s merger with Macy’s and a report that sales improved in November.
Market Roundup, D4
