FINANCIAL MARKETS : Yields Fall to 13-Month Low; Stocks Mixed
Treasury bonds resumed their powerful rally Tuesday, pushing long-term interest rates to their lowest level in more than 13 months. But stocks closed mixed, with the Dow industrials inching up to new highs while some broader indexes fell slightly.
Elsewhere, the dollar rose sharply against the German mark and edged up against the Japanese yen. Gold and silver prices plummeted as speculators sold heavily.
The bond market, which had rallied dramatically last week, did so again Tuesday on the latest evidence of a slowing economy.
The Commerce Department said wholesale business inventories piled up a larger-than-expected 1.2% in March, while wholesale sales fell 1% in March, the largest decline in more than 1 1/2 years.
Bond traders seized on that news as further confirmation that the economy is decelerating, which could eventually prompt the Federal Reserve Board to cut interest rates.
The 30-year Treasury bond yield dove as low as 6.899% on Tuesday, then rebounded somewhat to close at 6.94%, still down from 7.03% on Monday.
Traders said the bond market lost momentum after the government’s auction of three-year T-notes, which produced an average yield of 6.165%. Demand for the $17.5 billion in notes was weaker than expected, with $34.6 billion in bids.
Though the auction may have dented bonds’ rally, the 30-year bond yield still reached its lowest level since March, 1994.
Stocks, meanwhile, veered up and down through a volatile session that finished with the Dow industrial average climbing 6.91 points past Monday’s record high to a new peak of 4,390.78. The Dow had jumped 40 points Monday.
Tuesday’s rise in the Dow reflected gains in just a few stocks, mainly economically sensitive ones, including Caterpillar. Broader market indicators didn’t fare as well and the session produced a mixed showing.
The New York Stock Exchange composite index edged 0.06 point above the previous high reached Monday, to 281.74. But Standard & Poor’s 500-stock index slipped 0.40 point to 523.56.
Beyond the Big Board, stocks also turned in a mixed performance. The Nasdaq market index slid 1.12 points to 848.17.
However, gaining Big Board stocks beat losers by about 4 to 3 on volume totaling 365 million shares.
Wall Street started out on solid footing, with virtually all indicators advancing, partly because of computer-guided program buying. But the market stumbled later in the morning even as bonds managed to sustain their upward momentum.
The robust U.S. bond market had a favorable impact on European markets, and stock prices advanced in Frankfurt, London and Paris. Stocks were depressed in Tokyo, however, amid fears that trade tensions between Japan and the United States could intensify.
The dollar rallied sharply on new hints of a decline in German interest rates and a selloff of marks that traders stockpiled before France’s elections.
Comments by Hans-Juergen Koebnick, a German central banker who said short-term interest rates may be cut again if Germany’s inflation rate slows to 2% this year, provided an early boost for the dollar.
In New York trading, the greenback finished at 1.382 marks, up from 1.369 on Monday. It was also changing hands in New York at 83.45 Japanese yen, up from 83.35.
While investors moved into stocks and bonds on expectations of lower interest rates, funds were liquidating precious metals. On New York’s Commodity Exchange, May gold futures closed $6.20 lower at $383.60 an ounce. May silver futures collapsed 54.6 cents to $5.448 an ounce.
Among Tuesday’s highlights:
* The tumble in gold prices pressured gold-mining shares, with Newmont Mining off 2 at 39 1/2, Newmont Gold down 2 1/8 to 38 5/8 and Homestake Mining off 7/8 to 15 7/8.
* Brokerage stocks climbed on the prospects of better profits for Wall Street firms. Morgan Stanley rose 1 3/8 to 76 1/8, PaineWebber was up 1/2 to 19 1/2, Alex. Brown advanced 1/8 to 42 7/8, Legg Mason rose 5/8 to 25 1/8 and Lehman gained 1/4 to 20 3/4.
* Unilever tumbled 7 7/8 to 126 1/2 after the company reported disappointing first-quarter results.
Market Roundup, D6
