FINANCIAL MARKETS : Dow Up 4 as Yields Rise Again; Nasdaq Wobbles
A report of higher manufacturing prices renewed investors’ inflation worries and sent long-term interest rates moderately higher. At the same time, the bond market’s performance rattled the Nasdaq, which closed sharply lower. The Dow industrials managed to end marginally higher.
It was the fourth consecutive trading day of higher yields, with the bellwether 30-year bond yield rising to 7.91% from 7.87% on Friday. Its price, which moves in the opposite direction, fell 15/32 point, or $4.69 per $1,000 in face value.
A survey by the National Assn. of Purchasing Management shows the economy’s growth was slowing, but the report also says that more members paid higher prices for materials in December.
The association’s price index surged to 83% in December from 77.9% in the previous month, its highest level since March, 1980, and the fourth time in the past five months that the price index has risen.
The price component of the report renewed fears that the Federal Reserve Board will feel compelled to act again soon to nudge short-term interest rates higher. The central bank’s policy-making committee meets again Jan. 31.
The inflation implications of the report were troublesome to bond investors, who worry that the value of the securities will wither during times of high inflation.
On Wall Street, the Dow Jones industrials rose 4.04 points to 3,838.48, though declining issues narrowly outnumbered advances on the New York Stock Exchange.
Among the other major market indicators, the Nasdaq composite index fell 8.38 points to 743.58, while the NYSE’s composite index fell 0.21 point to 250.73. The Standard & Poor’s 500-stock index fell 0.16 point to 459.11; at the American Stock Exchange, the market value index dropped 0.51 point to 433.16.
Big Board volume was a moderate 263.05 million shares, up from 257.70 million in Friday’s session. The market was closed Monday for the New Year’s holiday.
Meanwhile, the dollar opened the 1995 trading year with a powerful surge, hitting the highest level against the Japanese yen in nearly five months, resuming its advance on Mexico’s peso and gaining on other key currencies.
The dollar closed at 100.68 yen in New York, up from 99.58 on Friday and the highest since it traded at 101.35 on Aug. 10. It also rose to 1.556 German marks, up from 1.549 on Friday. The greenback ended the session at 5.325 Mexican pesos, up from 4.75 on Friday, after Mexico’s government announced details of an emergency economic plan in response to the peso’s one-third plunge in value last month.
Mexican stocks also fell sharply, battered by fears for the economy. The Bolsa index fell 75.77 points to 2,278.47.
Other overseas markets were mixed. In Frankfurt, the DAX 30-share average closed 4.67 points lower at 2,074.78, while London’s Financial Times 100-share average ended at 3,065.7, up 0.2 point. The Japanese stock market was closed for the New Year’s holiday.
Among Tuesday’s market highlights:
* Telefonos de Mexico lost 2 3/8 to 38 5/8. The stock continued its decline amid Mexico’s continuing currency crisis. In Mexico, there were fears that the government’s emergency economic plan announced Tuesday would not do enough to bring the crisis under control.
Other Mexican stocks also fell, with Grupo Industrial Maseca ending down 2 1/8 at 14 3/8.
* Viewlogic lost 9 3/4 to 8 3/4 after the company said fourth-quarter earnings would be significantly below forecasts.
* Among other stocks, the two retailers in the Dow 30 finished with gains. Sears Roebuck rose 1 5/8 to 47 5/8 and Woolworth added 3/8 to 15 3/8.
* Chemical Banking rose 3/8 to 36 1/4, despite its disclosure of a big trading loss on the peso.
* Coral Gables Fedcorp rose 3 1/4 to 24 3/4 after First National Bank of Florida said it had agreed to acquire the company for $26.59 a share. First Union, parent of the acquirer, rose 3/8 to 41 3/4.
