FINANCIAL MARKETS : Dow Up 4 as Yields Rise Again; Nasdaq Wobbles
A report of higher prices paid by manufacturers in December renewed investors’ inflation worries Monday, sending bond yields up and rattling Wall Street, where stocks closed mixed.
Surprisingly, a surge in the dollar was no help to markets.
The Dow industrial average added 4.04 points to 3,838.48 on the first trading day of the New Year, but smaller stocks tumbled, as did Mexican shares.
In the bond market, long-term yields advanced for a fourth consecutive session after the National Assn. of Purchasing Management, a corporate trade group, said its members paid higher prices for materials in December.
The association’s price index surged to 83% in December from 77.9% the previous month. The latest figure is the highest since March, 1980, and marks the fourth time in the past five months that the price index has risen.
The news sent the yield on the 30-year U.S. Treasury bond to 7.91%, highest since Dec. 12 and up from from 7.88% last Friday. Shorter-term yields also rose, as did bond yields in Europe.
Even though the purchasing managers’ survey also pointed to signs of slowing economic growth, the price index renewed fears that the Federal Reserve Board will feel compelled to raise interest rates later this month, to ensure that the economy decelerates and that inflation remains contained.
Some traders said they were surprised at bonds’ weakness given the dollar’s rebound. The greenback opened 1995 with a powerful surge, hitting the highest level against the Japanese yen in nearly five months.
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.
A strong dollar should help support U.S. stocks and bonds, because foreign investors should be more attracted to U.S. investments.
The dollar also surged against the Mexican peso, to 5.325 pesos from 4.75 on Friday, after Mexico’s government announced details of an emergency economic plan that was not well received.
On Wall Street, meanwhile, declining issues narrowly outnumbered advances on the Big Board in moderate trading.
But the Nasdaq composite index of mostly smaller stocks plunged 8.38 points, or 1.1%, to 743.58, which some traders attributed to delayed profit taking by investors who wanted to record gains in 1995 for tax purposes.
Among the market highlights:
* Transportation issues showed strength. CSX gained 1 1/8 to 70 3/4, Conrail jumped 1 1/2 to 52, and UAL, parent of United Airlines, surged 2 1/8 to 89 1/2.
* Some utility shares also rose. The Dow utility index jumped 1.51 points or 0.8% to 183.03.
* But falling Nasdaq issues included Viewlogic, which 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.
* 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.
Other Nasdaq losers included Nextel, down 2 at 12 5/8; America On-Line, down 3 1/4 at 52 3/4; Davidson Associates, off 6 at 26 1/2, and Tellabs, off 2 3/4 to 53.
* In Mexico City, the Bolsa index fell 75.77 points to 2,278.47.
Among U.S.-traded Mexican issues, Telmex dove 2 3/8 to 38 5/8, Mexico Fund sank 1/2 to 22 1/8, Emerging Mexico Fund dropped 1 1/4 to 11 1/2 and Grupo Tribasa was off 1 1/2 to 15 1/8.
In Argentina, the Merval stock index slumped 3.3%, while in Brazil, the Bovespa stock index dropped 5.1% as jitters about Mexico spread. 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.
