FINANCIAL MARKETS : Short Rates Zoom; Stocks Close Mixed
Short-term interest rates rocketed for a sixth straight trading session Monday, pushed by new reports of economic strength and by year-end portfolio shifting by institutional investors.
On Wall Street, stock prices were mixed in moderate trading, with the Dow industrials easing 3.70 points to 3,741.92 after surging nearly 45 points Friday.
The major action Monday was in the market for shorter-term Treasury securities, as yields jumped to their highest levels in nearly four years, continuing the pattern of the past week.
New three-month T-bills were auctioned at a yield of 6%, up from 5.59% just a week ago. The yield on one-year T-bills zoomed to 7.12% from 6.99% on Friday.
Analysts said the market was responding both to expectations of further rate boosts by the Federal Reserve Board in 1995, as the economy continues to boom, and to selling of shorter-term securities by banks and other investors readjusting their portfolios.
The two-year Treasury note has come under particular pressure over the past week, which traders said suggested that banks--major owners of two-year notes--were bailing out to raise cash. The two-year T-note yield hit 7.58% on Monday, up from 7.44% on Friday.
Meanwhile, longer-term bond yields were only marginally higher, with the 30-year T-bond yield at 7.92%, up from Friday’s 7.90%.
Analysts noted that the narrowing spread between short- and long-term interest rates is a classic sign of a market that expects the economy to slow sooner rather than later.
Among the market highlights:
* Many defense stocks rose, which some traders said reflected expectations for higher defense spending under the Republican Congress. Raytheon rose 1 to 63 1/4, Rockwell jumped 1 1/4 to 35 3/4, Boeing gained 1 1/8 to 46 1/2 and Loral surged 1 3/8 to 40 5/8.
* Some tech stocks rebounded from their recent drubbing. Intel rose 1 1/4 to 64 1/8, Micron Technology gained 2 1/4 to 44 1/4, Compaq added 3/4 to 40 7/8 and Peoplesoft leaped 3 3/8 to 64 7/8.
But AT&T; fell 3/4 to a new 1994 low of 47 5/8. The long-distance giant asked federal regulators to OK a rate hike.
Overseas, Tokyo’s 225-share Nikkei average jumped 307.36 points to 19,305.66, while Frankfurt’s DAX average gained 32.61 points to 2,071.12 and London’s FTSE-100 index added 16.2 points to 3,033.5.
In Mexico City, the Bolsa index was down 16.06 points at 2,521.42.
In commodities trading, silver continued to plummet after last week’s dive. Near-term futures dropped 11.6 cents to $4.57 an ounce on the New York Merc. Gold was unchanged at $375.50.
