FINANCIAL MARKETS : Yields Plunge on Sales Data; Dow Rises 23.52
Treasury bond yields plunged to seven-month lows and prices soared Tuesday in a powerful market rally triggered by fresh indications that the economy has slowed from last year’s brisk pace.
The rally spilled over to other financial markets, lifting stock prices to record highs amid heightened expectations that stable interest rates would strengthen corporate profits.
The yield on the key 30-year bond tumbled 0.09 percentage point to 7.36%, the closing level of last Aug. 16. The yield had ended at 7.45% on Monday. The bond’s price, which moves inversely to the yield, jumped 1 5/32 points, or $11.56 per $1,000 in face value.
Intermediate-range Treasury securities, viewed as less volatile than long-term bonds, were also in demand. The yield on 10-year notes, for example, dropped to 7.10% from 7.18% on Monday.
On Wall Street, a broad range of issues big and small participated in the advance of stocks. The Dow reached 4,048.75, up 23.52 points, topping its former record of 4,035.61 set Friday.
The Standard & Poor’s 500-stock index and the Nasdaq composite index also climbed to new peaks. The S&P; 500 rose 2.84 points to 492.89; the Nasdaq surpassed a year-old mark and closed at 808.24, up 5.93 points. Its previous high of 803.93 had stood since March 18, 1994.
The New York Stock Exchange composite index rose 1.36 points to 266.53. At the American Stock Exchange, the market value index rose 0.85 point to 453.91.
On the NYSE, 346.18 million shares changed hands, compared to 275.28 million on Monday. Advancing Big Board stocks outnumbered declining issues about 13 to 7.
Investors began snapping up a variety of Treasury securities immediately after the Commerce Department reported that retail sales dropped 0.5% in February, the first month of decline in nearly a year. Analysts had expected to see a moderate rise.
Investors viewed the report as strong evidence that the economy is cooling off and the Federal Reserve Board will not have to raise interest rates again. The Fed has raised short-term rates seven times since February, 1994, saying higher rates were needed to slow the economy to a non-inflationary rate of expansion.
Inflation erodes the value of government bonds and other securities that pay a fixed rate of return. But rising interest rates also hurt bond prices, and persistent uncertainty last year about the timing and size of the Fed’s increases hammered the Treasury market.
Meanwhile, the dollar advanced modestly against other key currencies, bolstered by the falling bond rates and a growing sentiment that risk to the American economy from Mexico’s financial crisis is easing.
The greenback closed at 1.417 German marks in New York, up from 1.407 on Monday, and at 90.85 Japanese yen, up from 90.73 on Monday.
Among Tuesday’s highlights:
* Boeing spurted 2 1/8 to 48 7/8 after it was announced that Scandinavian Airline System was ordering 35 Boeing 737 jetliners, worth $1.16 billion, and placing options to buy 35 more aircraft from the Seattle-based manufacturer.
* Sports & Recreation tumbled 7 3/4 to 10 3/4 in heavy NYSE turnover. The company’s quarterly results disappointed Wall Street and prompted at least one analyst to slash the investment rating of the stock.
* Procter & Gamble rose 1 3/8 to 68 5/8. The big consumer products company announced that Chairman and Chief Executive Edwin L. Artzt will retire July 1 and will be succeeded by John E. Pepper, currently president of the company.
* PaineWebber Group rose 1/8 to 17 on rumors that the brokerage is considering layoffs of perhaps 500 traders and other employees.
* Apple Computer fell 3 1/8 to 35 in heavy trading after its investment rating was downgraded to “neutral” from “outperform” by Morgan Stanley & Co.
* Dart Group Class A stock was up 14 3/4 at 89 3/4. The retail chain is considering a $130-million stock buyback or a special dividend to boost its share price, and is thwarting a bid for control from President Ronald Haft.
Foreign stock markets were mixed. Tokyo’s 225-share Nikkei average fell 231.82 points to 16,245.82. In London, the FTSE-100 average closed at 3,050.6, up 38.8 points. In Frankfurt, the 30-share DAX average closed up 0.96 points at 2,000.45. Mexico’s Bolsa index finished the day at 1,591.07, up 5.05 points.
