FINANCIAL MARKETS : Record for Dow; Dollar Retreats
The stock market maintained its forward momentum Monday, carrying the Dow industrial average to its sixth straight record.
But the dollar slipped against major currencies in profit taking after last week’s rally and amid uneasiness as the United States prepared to announce possible trade sanctions against Japan.
On Wall Street, the Dow added 6.91 points to 4,437.47, and the broad market advanced strongly. Winners topped losers by 14 to 9 on New York Stock Exchange in moderate trading.
Most broader indexes also reached new highs, and the American Stock Exchange index finally topped its record set in the winter of 1994. The Amex index rose 0.55 point to 488.31, surpassing the old peak of 487.89.
The Russell 2,000 index of smaller stocks gained 1.08 points to 270.93, just below its record of 271.08 set in March, 1994.
“This is a bull market that is still alive and well,” said Alfred E. Goldman, analyst at brokerage A.G. Edwards & Sons in St. Louis. “The optimistic camp is increasing, but we haven’t seen the type of conditions you normally see at important market tops.”
Stocks were helped as the bond market rally restarted after a backup in interest rates last week. Yields fell across the board Monday as buyers returned to bonds.
The 30-year Treasury bond yield dropped from 6.99% on Friday to 6.94%, matching the 13-month low set a week ago. Among shorter-term securities, the yield on two-year T-notes slipped to 6.14% from 6.19% on Friday.
Traders said investors were buying in anticipation of continued weakness in economic data.
Following recent reports of weaker April sales of autos, retail and other goods, many analysts expect the government today to report drops in two key industrial measures: April factory production and operating capacity.
The most powerful force propelling the stunning stock and bond market rallies this year has been the assumption that the Federal Reserve Board’s 1994 interest rate hikes have succeeded in slowing the economy to a more moderate, low-inflation pace.
Though some economists argue that the economy will accelerate again this summer, the “soft landing” scenario continues to win new converts on Wall Street, prolonging market rallies.
Meanwhile, neither stocks nor bonds seemed bothered by the dollar’s stall Monday. After rallying sharply last week, the greenback ran into profit taking.
In quiet trading, the dollar fell to 86.35 Japanese yen in New York from 86.70 on Friday, and to 1.434 German marks from 1.448.
The United States turned up the pressure on Japan on Monday, saying it will announce today a list of Japanese products that will be hit with punitive tariffs unless an agreement on opening Japan’s auto market is reached.
Dollar bulls are hoping the U.S. posture leads to trade reform in Japan that will cut the country’s trade surplus with the United States. But some analysts worry about a full-blown trade war.
Among Monday’s highlights:
* Investors continued to rush into industrial issues that might benefit more from a longer economic expansion, while dumping shares of certain classic growth stocks that had rallied strongly in recent months.
Winners included GM, up 1 3/8 to 48; Deere, up 2 5/8 to 89 3/4; PPG Industries, up 2 1/4 to 40 1/2; Timken, up 2 to 44 7/8, and USX-U.S. Steel, up 1 to 32 1/4.
On the downside, growth issues losing ground included Coca-Cola, off 1 1/8 to 57 7/8; Gillette, off 1/2 to 82 1/2; Johnson & Johnson, off 1 1/8 to 63 5/8, and American Home Products, down 1 1/2 to 74.
* Defense issues rallied for a second session. McDonnell Douglas surged 1 3/4 to 68 7/8, Logicon shot up 1 1/4 to 38 1/2 and General Dynamics rose 7/8 to 46 3/4.
* Financial service issues rocketed as bond yields fell. Morgan Stanley jumped 3 1/4 to 78 3/8, Wells Fargo added 2 5/8 to 176 5/8 and BankAmerica leaped 1 3/8 to 52.
* Smaller stocks joining in the rally included Starbucks, up 1 1/4 to 30 3/8; Barnes & Noble, up 1 1/2 to 30 3/4; Boston Chicken, up 1 1/4 to 23 1/2, and Ortel, up 1 1/2 to 16.
In foreign markets, Tokyo’s 225-share Nikkei average closed up 188.94 points to 16,609.70, London’s FTSE-100 index added 0.4 point to 3,310.7, and Frankfurt’s DAX index eased 10.18 points to 2,086.74.
Mexico City stocks closed higher after the reelection of Argentine President Carlos Menem was seen as a sign of economic stability for all of Latin America. The Bolsa stock index gained 21.36 points to 2,048.20.
