FINANCIAL MARKETS : Stocks, Bonds Gain on News of Slower Growth
Stocks ended slightly higher in erratic trading Monday after two economic reports indicating slower growth prompted guarded optimism about interest rates.
However, concerns about higher commodity prices and the continuing decline of the U.S. dollar tempered enthusiasm for stocks, analysts said.
The Dow Jones industrial average rose 10.72 points to 4,168.41, just shy of Thursday’s record close of 4,172.56.
In the broader market, advancing issues narrowly outnumbered declines on the New York Stock Exchange, reversing course late in the session. Big Board volume came to 296.43 million shares, down significantly from 353.09 million on Friday.
Analysts said the market got mixed indications about the economy and interest rates. The dollar dropped to a record low while economic news showed that the economy is in a “soft landing” mode, pushing credit market interest rates lower.
At center stage, analysts said, was the sense that the economy is slowing under the weight of the Federal Reserve Board’s seven interest rate increases over the past 14 months.
A widely followed survey of manufacturers showed that American manufacturing expanded in March, but at a slower pace than in previous months.
Earlier, the Commerce Department said Americans’ personal income rose 0.5% in February, the smallest gain in three months, while spending increased more slowly than it has in nearly a year.
Bond investors like word of slow economic growth, which portends low inflation. Cost-of-living increases erode the value of fixed-income investments.
The Treasury’s main 30-year bond yield fell 0.04 point to 7.39. Its price, which moves in the opposite direction, gained 15/32 point, or about $4.69 per $1,000 invested.
Still, all was not rosy for the stock market.
The Commodity Research Bureau’s index of 21 futures contracts, an indicator of inflation, rose 1.59 points to 234.53 on Monday.
The dollar’s continued decline similarly tempered enthusiasm.
Broader market indexes, including the New York Stock Exchange, Standard & Poor’s 500, Nasdaq and the American Stock Exchange, all closed higher.
Among Monday’s highlights:
* Raytheon fell 1 1/8 to 71 3/4 after it said it would pay $2.3 billion in cash for E-Systems. E-Systems rallied 18 5/8 points to 63 7/8.
* Sybase lost 7/8 to 39 1/8 after Goldman, Sachs & Co. lowered a rating on the stock.
* Health Systems International and WellPoint Health Networks Inc. said they signed a merger agreement. Health Systems gained 3/8 to 34 while WellPoint fell 1 1/4 to 33 3/4.
* Stratus Computer lost 3 3/8 to 27 7/8. Late Friday it revised downward its estimate of first-quarter revenue.
* Mobil dropped 2 1/8 to 90 1/2 on a downgrading of the stock by Donaldson, Lufkin & Jenrette, which cited the stock’s price level.
* DuPont gained 1/2 to 61. Seagram has said it wants to sell its 25% stake in DuPont.
* Morrison Knudsen rose 1 to 7. The engineering, construction and rail concern named Robert Miller Jr., a former Chrysler Corp. top executive, its new chairman. Smith Barney upgraded a rating on the stock.
* Horizon Healthcare fell 3 1/2 to 23 1/4. The company has said it agreed to buy Continental Medical Systems in a stock swap valued at $502.1 million. Continental rose 3 3/4 to 11 3/8.
* Hillhaven fell 1 1/4 at 25 1/4.
Stocks ended mostly higher abroad, though Japan’s 225-share Nikkei average plunged 758.66 points, or 4.7%, to 15,381.29, its lowest finish since August 20, 1992.
The German DAX 30-share average ended at 1,930.82, up 8.23 points. London’s Financial Times 100-share average added 5.2 points to close at 3,143.1.
