FINANCIAL MARKETS : Dow Rallies to New High; Dollar Up Too
Recovering from a morning slump, stocks finished mostly higher Friday as bond yields pulled back from an early surge.
Meanwhile, the dollar continued to strengthen, boosting hopes that the currency has finally bottomed after its deep slide since year’s end.
On Wall Street, the Dow industrial average climbed back from a 31-point loss to close with a gain of 6.57 points at 4,321.27, a new high.
Broader market indexes, including the Standard & Poor’s 500 and the Nasdaq composite, also set records as buyers emerged to snap up stocks after their early selloff.
Winners topped losers by 1,173 to 1,035 on the Big Board, a narrow margin but enough to keep the bull market alive.
Analysts traced stocks’ morning losses to a jump in bond yields, as traders sifted through a number of economic reports.
Although the government said the economy expanded at a moderate 2.8% annual rate in the first quarter--the weakest growth since the summer of 1993--the Chicago Purchasing Management Assn. reported that its April index of area economic activity rose to 57.6 from 55 in March.
Also, the University of Michigan reported a jump in its index of consumer confidence this month.
Some bond traders viewed the Chicago data and confidence survey as signs that the economy’s pace is picking up after the first-quarter slowdown, and thus that there may be renewed upward pressure on interest rates.
By midday, the yield on the 30-year Treasury bond had jumped to 7.38% from 7.33% on Thursday. Shorter-term yields also surged, with the one-year T-bill yield rising as high as 6.36% at midday from 6.21% on Thursday.
But bonds rallied in the afternoon, bringing the 30-year T-bond yield down to 7.34% by the close, and the one-year T-bill yield down to 6.30%.
Bonds may have been helped by the dollar’s persistent strength. It rose to a three-week high of 84.20 Japanese yen in New York, up from 83.70 on Thursday, and to a two-week high of 1.387 German marks, up from 1.378.
Though trading was thin, some analysts said the dollar’s gains this week may indicate that traders don’t want to take the chance of hammering the currency lower, risking intervention by major industrial countries.
On Tuesday, finance ministers of those countries met and declared that the dollar had fallen too far.
Among Friday’s highlights:
* The Dow was led higher by heavy-industry issues, which analysts said reflected some investors’ hopes that slower economic growth will guarantee a longer-lasting economic expansion.
Winners included Caterpillar, up 1 3/4 to 58 1/2; Alcoa, up 1 3/8 to 44 7/8; Union Carbide, up 1 to 32 1/8, and International Paper, up 1 3/4 to 77.
* Auto stocks rallied. Some investors are betting that the Big Three will sharply raise dividend payments this year. Investor Kirk Kerkorian, though his takeover bid for Chrysler appears thwarted, is pushing for a bigger dividend.
Chrysler rose 1 3/8 to 43 1/4, Ford gained 1/4 to 27 1/8 and GM jumped 1 5/8 to 45 1/8.
* Many tech issues continued to surge. Microsoft leaped 3 1/8 to 81 3/4, Cadence Design jumped 3 to 32 and Tekelec added 1 1/8 to 24 1/2. But IBM fell 2 1/4 to 94 5/8 after a Wall Street Journal article questioned the mainframe-computer industry’s growth prospects.
Overseas, stocks were modestly lower in Tokyo, London and Frankfurt. In Mexico City, the Bolsa index fell 25.09 points to 1,960.54, giving back some of the week’s gains.
