FINANCIAL MARKETS : Stocks Post Modest Gains; Bonds Rally
Stocks rallied late in the session Wednesday after largely directionless trading, buoyed by a strong dollar and bond market.
The Dow Jones industrials rose 19.17 points to 3,857.65, adding to a 4.04 rise Tuesday, the first trading day of the year. Most of the gains were made in the final 30 minutes.
Some investors were disappointed at the showing. “The market is very, very directionless,” said First Albany Corp.’s Hugh Johnson. “There’s almost no sense of urgency by investors to either buy or sell stocks.”
Stocks typically rise in January as investors reinvest dividends and portfolio managers get new cash. But this year’s rally has been elusive so far.
One factor working against the market is that stock funds lost an average 1.6% in total return in 1994, according to data released Wednesday by Lipper Analytical Services. The poor returns could discourage investors from putting new money into the stock market.
In the broader market, advancing issues led decliners by about 3 to 2 on New York Stock Exchange volume of 319.45 million shares, up from 263.05 million Tuesday.
Broad market indexes also finished higher.
Treasury bond yields fell for the first time in five trading days in a rally triggered by revived strength in the dollar and plunging prices of precious metals.
The key 30-year bond yield closed at 7.85%, down from 7.91% on Tuesday, while its price, which rises when rates fall, surged 23/32 point, or $7.19 per $1,000 in face value.
The rising U.S. currency reassured investors worried about inflation, which tends to diminish the value of fixed-income securities.
In the currency markets, the dollar opened higher and maintained its gains after the Commerce Department said construction spending rose 0.7% in November, slightly less than expected.
The dollar closed in New York at 101.35 Japanese yen, a 21-week high and up from 100.68 on Tuesday.
The dollar also changed hands in New York at 1.559 German marks, up from 1.556.
Also allaying investors’ inflation fears was a plunge in the price of gold, which is often bought as a hedge against inflation. Prices skidded to their lowest level in eight months as investors turned up the selling pressure, convinced that 1995 will not be a good year for the precious metal.
On New York’s Comex, gold closed with a loss of $5.60 at $374 an ounce, its lowest since May 5. Silver also came under pressure, with the March contract down 12.6 cents at $4.635 an ounce.
Among the market highlights:
* Mexican companies were again depressed by that country’s crisis in the peso. Telefonos de Mexico, the most active issue on the NYSE, was down 1/2 at 38 1/8, and Grupo Televisa dropped 1 1/8 to 28 5/8.
* Auto stocks were major gainers following a “buy” signal by Bear Stearns on General Motors, Chrysler and Ford. Chrysler shares rose 1 7/8 to 50 7/8, General Motors advanced 1 1/2 to 43 1/4 and Ford added 3/4 to 28 5/8.
* Johnson & Johnson said it agreed to buy Mitek Surgical Products Inc., a maker of surgical anchors, in a deal valued at $128 million. The news boosted Mitek’s shares 5 1/2 to 29 on the Nasdaq market. Johnson & Johnson’s stock closed up 1/2 at 55.
* Union Carbide rose 1 1/2 to 29 1/2 after the Wall Street Journal reported that company insiders were buying the stock and that analysts expect good earnings growth.
* Dow Chemical rose 2 1/8 to 68 1/2. Salomon Bros. upgraded the stock to “buy” from “hold,” citing cyclical benefits and the stock’s relatively low price.
* Technology stocks were mixed after opening strong. IBM finished up 5/8 at 74 3/8 after gaining as much as 7/8. Dell Computer added 2 3/8 to 42 1/4 after the computer maker said it completed conversion of its OptiPlex product line to Intel Corp.’s updated Pentium chip, which corrects the earlier chip’s division flaw.
Overseas stocks closed lower. In London, the Financial Times 100-share average fell 14.1 points to 3,051.6. Frankfurt’s 30-share DAX average closed at 2,072.26, off 2.52 points. Tokyo’s 225-share Nikkei average closed down 39.02 points at 19,684.04.
