FINANCIAL MARKETS : Blue Chips Finish Slightly Higher; Bond Yields Dip
After rising more than 37 points during morning trading, blue-chip stocks closed slightly higher Tuesday amid concern about upcoming inflation data. The selloff came despite a report showing only moderate wholesale price increases in December.
In addition, two quarterly earnings reports pulled the market from different directions. Strong numbers from Motorola boosted chip and other technology issues, but as-expected earnings from International Paper depressed some stocks of companies whose fortunes are tied to the economy.
The Dow Jones industrial average rose 5.39 points to 3,866.74, and advancing issues finished just about even with decliners on the New York Stock Exchange. Big Board volume was a heavy 351.28 million shares.
The Labor Department said its producer price index edged up a tepid 0.2% in December, a rise private economists had predicted. Wholesale prices rose a moderate 1.7% for the year.
“The numbers were right on target, which means we might get a reprieve in the interest rate picture,” said Bill Allyn, managing director at Jefferies & Co.
Indeed, the bond market rebounded on the news, pushing interest rates down. But the market closed under its highs amid weakness in the dollar for the second straight day.
Some of the bond market advance also evaporated in the afternoon as traders started to worry about the consumer price index report, due today, which is expected to be up a modest 0.3% for the month.
By day’s end, the yield on the Treasury’s key 30-year bond fell to 7.86% from Monday’s 7.88%; its price, which moves in the opposite direction, was up 7/32 point, or $2.19 per $1,000 in face value.
There is still concern that the strength of the economy will mean higher inflation, and that could nudge the Federal Reserve Board to raise interest rates again soon, pushing bond yields higher.
Meanwhile, the Canadian dollar fell to a nine-year low against the U.S. dollar, despite an increase in short-term interest rates by the Bank of Canada and the central bank’s intervention to support the currency.
In New York, the Canadian dollar closed at 70.88 U.S. cents, down from 70.99 cents on Monday. That is the lowest level since March, 1986.
The U.S. finished mixed against other major currencies, declining against the German mark and advancing slightly against the Japanese yen in relatively quiet trading as the market took stock of Monday’s dollar plunge. It closed at 100.08 yen in New York, up from 99.93 on Monday, and at 1.533 marks, down from 1.537.
Among market barometers, the Nasdaq index showed the highest gains, rising 4.45 points to 756.54. Other major market indicators posted small gains.
Among the market highlights:
* Motorola climbed 2 7/8 to 61 3/4 after the company said its fourth-quarter earnings rose to 86 cents a share from 58 cents, beating even the highest Wall Street estimates.
* Other semiconductor stocks ended higher, with National Semiconductor up 1/4 at 19 7/8, Advanced Micro up 1/4 at 29 1/8, Texas Instruments up 3 5/8 at 75 1/4, Micron Technology up 1 3/4 at 44 3/4 and Intel up 5/8 at 66 5/8. Apple Computer rose 2 31/64 to 43 11/16.
* IBM rose 1 1/8 to 76 5/8 after touching a new 52-week high of 77 1/4.
* International Paper, however, with its on-target earnings of $1.23 a share, lost 3/4 to 77. Other so-called cyclical stocks such as transport and chemicals put in mixed performances. Dow Chemical fell 3/8 to 69.
* Polaroid fell 3 to 29 7/8 after the company announced that it expects to report fourth-quarter operating profit at about the same level as the year-earlier quarter’s.
Mexican stocks appeared on the NYSE’s most-active list once again, tumbling with the Mexican stock market. Telefonos de Mexico lost 3 1/8 to 33 3/8, hurt also by a J.P. Morgan downgrade, and Grupo Televisa fell 3 3/8 to 21 3/4
Overseas markets were mixed. In Frankfurt, the DAX 30-share average finished down 8.08 points at 2,051.10, and Tokyo’s 225-share Nikkei average ended up 56.53 points at 19,501.45. In London, the Financial Times 100-share average closed 4.6 points higher at 3,060.4.