FINANCIAL MARKETS : Blue Chips Up Strongly; Bonds Suffer
Investors waiting anxiously for signs of a year-end rally in stocks saw a glimmer of hope in a blue-chip rally Monday, but the overall market closed mixed as bond yields rose again.
The Dow industrial average jumped 27.26 points to 3,718.37 in a late buying surge, but advancing and declining issues on the New York Stock Exchange were nearly even in moderate trading.
The bond market stole investors’ focus once again, as long-term yields reversed after sliding last week. In fact, Treasury bond yields rose across the board as jittery investors braced for economic reports that could reignite inflation worries.
Today, the government will report on November wholesale prices, and consumer prices for the month are due Wednesday.
Analysts were predicting a 0.5% increase in wholesale prices and a 0.3% rise in consumer prices. In contrast, wholesale prices fell 0.5% in October, and consumer prices were up just 0.1%.
Experts say slightly higher prices would reflect the economy’s strength and would thus increase the odds that the Federal Reserve Board will continue to tighten credit to restrain inflation.
The bond market, fearing higher-than-expected inflation numbers, pushed the yield on the 30-year Treasury bond to 7.92% on Monday from 7.85% on Friday.
In the stock market, last week’s sharp declines in the wake of Orange County’s bankruptcy filing led some bargain hunters to Wall Street, but the blue chips’ rally was offset by a plunge in key technology issues.
The Nasdaq composite index, laden with tech issues, added just 0.07 point to 719.12, but that was much improved from its low for the day of 712.09.
Still, “after the calm of the weekend and the realization that Orange County isn’t going to go down the drain, things have begun to stabilize” in the stock market, said Don R. Hays, director of investment strategy at Wheat First Securities in Richmond, Va.
Other analysts, however, worry that another jump in interest rates could sound a death knell for stocks, as more investors return to bank CDs and other now-higher-yielding short-term investments.
Among Monday’s highlights:
* Blue-chip issues rebounding included Alcoa, up 1 3/8 at 80 1/4; 3M, up 1 1/4 at 52 3/4; International Paper, up 1 at 73, Dow Chemical, up 1 1/8 at 64; Mobil, up 1 7/8 at 85 1/8, and Texaco, up 2 at 62 1/2.
* Some retailers got a boost as a cold snap spurred holiday apparel sales. Dayton Hudson surged 2 to 78 1/2, Nordstrom rocketed 3 1/8 to 46 5/8 and Sears added 7/8 to 44 3/4.
* Utility stocks also continued their recent rebound. The Dow utility index jumped 2.31 points, or 1.3%, to 181.65. Rising utility stocks have historically signaled interest rate peaks.
* On the downside, computer chip giant Intel led a selloff in many tech issues, after IBM announced it was suspending shipments of PCs run by Intel’s troubled Pentium chip.
Intel plunged 2 3/8 to 60 3/8 in extremely heavy trading of 16 million shares. IBM lost 7/8 to 70 5/8.
The selling spread to other computer makers, with Dell dropping 1 1/4 to 39 5/8, Gateway 2000 off 3/8 at 22 and Compaq down 7/8 at 39.
* General Dynamics leaped 3 3/4 to 42 3/8 and McDonnell Douglas was off 1/2 at 142 1/2 after a federal claims court judge on Friday vacated the Navy’s A-12 attack jet contract termination, which the companies have been fighting.
In foreign markets, London’s FTSE 100-stock index fell 33.9 points to 2,943.4, while Frankfurt’s DAX index eased 3.51 points to 2,024.82. Tokyo stocks lost early gains and closed a little lower. The 225-share Nikkei average slipped 3.20 points to 18,975.10.
The Mexico City market was closed for a national holiday.
In U.S. commodities trading, January crude oil futures dropped 22 cents a barrel to $16.91 on the New York Merc after gasoline futures plunged anew, reacting to word that the government will not enforce a Jan. 1 deadline in the Northeast to use cleaner “reformulated” gasoline.
