FINANCIAL MARKETS : Report of Retail Slowdown Dampens Yields; Dow Up 4.04
Treasury bond yields finished sharply lower Tuesday after a weaker-than-expected figures on January retail sales renewed a feeling that the economy is starting to lose some of its vigor.
Bond prices staged an across-the-board rally after the Commerce Department reported that retail sales rose 0.2% in January--less than the 0.3% rise analysts had predicted.
The bellwether 30-year bond yield fell to 7.59% from Monday’s 7.66%%. Prices climbed 13/16 point, or $8.12 per $1,000 invested. Bond prices rise when yields fall.
The unexpectedly weak retail sales--led by the first drop in auto sales in half a year--stirred bond investors’ hopes that the economy might be slowing in response to several interest rate increases induced by the Federal Reserve.
“You have evidence that the economy is starting to turn over. Those are the things that the bond market likes to see,” said Bob Brusca, chief economist with Nikko Securities International Inc.
Stocks treaded water most of the day after a positive start. Market indicators pushed prices solidly higher in the opening hour of the session, reflecting hope that economic growth had slowed to a non-inflationary rate. But the buying eased by mid-morning and the market meandered through the rest of the session. The Dow Jones industrial average ended 4.04 points higher at 3,958.25.
One highlight of an otherwise dull day on Wall Street was the performance of Standard & Poor’s 500 stock index. It reached a new closing high of 482.55, up 0.90 point from Monday. Its previous record, 482.00, had stood since Feb. 2, 1994.
Declining stocks outnumbered advancing ones on the New York Stock Exchange, where a closing count showed 1,056 issues rising and 1,127 falling.
Big Board volume came to 301.21 million shares, up from 255.19 million shares traded the day before.
Initially, buyers got encouragement from the retail sales report, but it wasn’t enough to dispel all fear of further Fed action. Figures on consumer prices and industrial production, due out today, were expected to shed further light on the economy’s condition.
Meanwhile, the dollar slumped to a two-week low against the German mark as technical selling and concerns about the stability of Mexico offset the positive effects of a rally in the U.S. bond market.
In New York, the dollar was quoted at 1.509 marks, down from 1.522 marks Monday.
The greenback ended only slightly lower against the Japanese yen. Selling of yen for marks and reports of large-scale Japanese buying of U.S. Treasury securities helped provide a floor for the dollar, analysts said. The U.S. currency changed hands at 98.52 yen to the dollar, down from 98.76.
Among Tuesday’s highlights:
* Analysts said the Dow average was lifted by a rally of 1 3/8 to 33 1/2 in the shares of Dow Jones component American Express, on the news that billionaire investor Warren Buffett was increasing his stake in the company.
* he shares of semiconductor companies were strong: Texas Instruments was up 2 5/8 to 79 5/8; Micron Technologies rose 2 1/8 to 55; Intel, which was upgraded by S. G. Warburg, gained 1 3/8 to 78 1/2.
* PepsiCo rose 1 5/8 to 38 5/8 after its chairman told analysts the company may slow expansion of its company-owned restaurants unless they show improved performance.
* United Health Care fell 2 1/2 to 45 1/4 after reporting earnings that failed to impress the investment community.
* Limited rose 1 to 18 1/4 after reporting a 31% increase its its fourth-quarter profit.
* Oak Technology Inc., a producer of multimedia semiconductors and software for personal computers, rose 7 1/2 to 21 1/2. STB Systems Inc., maker of computer graphics adapters, rose 1 1/4 to 13 1/4.
In Tokyo, the Nikkei average shed 175.39 points to end at 18,138.47. In Europe, Frankfurt’s DAX average was up 16.29 points to 2,133.24. In London, the Financial Times’ 100-share average ended at 3,071.3, down down 9.8 points.
