FINANCIAL MARKETS : Bonds Yields Fall; Stocks End Mixed
Treasury bonds rallied sharply as yields plunged to 14-month lows on Tuesday, giving fresh momentum to this month’s powerful rally as foreign and domestic investors renewed their bond-buying spree.
Stocks settled for a mixed showing, and the dollar closed higher.
The bond market’s steep advance, concentrated among long-term bonds, was mainly linked to a surge of buying that fed on itself--drawing in investors in Europe and elsewhere who had been sitting out the rally.
By day’s end, the benchmark 30-year bond yield fell to 6.86%, its lowest since closing at 6.85% on March 22, 1994. It closed at 6.94% on Monday. Its price, which moves in the opposite direction, was up 1 1/8 points, or $11.25 per $1,000 in face value.
Analysts also cited a report of surprisingly weak housing starts in April, which reinforced market sentiment that economic weakness is holding inflation in check. The government reported that housing starts rose 0.4% in April. Traders had been expecting a much stronger 5.8% increase.
However, bond strategists said the market had already been headed higher in early trading on the strength of overseas buying by traders and investors in London and Tokyo.
Investors bought mostly longer-term securities, whose value over the many years until maturity is highly vulnerable to inflation pressures.
In the stock market, blue chips snapped a six-day winning streak. The Dow Jones industrial average bobbed only slightly throughout the session, finishing 2.42 points lower at 4,435.05.
Broader market gauges gained enough to provide Wall Street with several more records, however, and the overall breadth of the New York Stock Exchange was decidedly positive. The NYSE composite index, Standard & Poor’s 500 stock index, the Nasdaq composite index and the American Stock Exchange index all set new highs Tuesday.
Gainers beat losers by better than a 3-to-2 margin on the Big Board, where volume swelled to 366.24 million shares, up from 314.82 million on Monday.
Market analysts said the enthusiasm the bond market tempered the tendency to take profits by investors who have amassed handsome winnings during Wall Street’s extended rally.
Among Tuesday’s highlights:
* Microsoft rose 3 9/16 to 84 7/8, Borland was up 1 to 11 7/8 and Intel gained 1/2 to 108 7/8.
* Pacific Telesis fell 2 3/4 to 26 7/8 after saying that it expects this year’s earnings to drop by 10% from 1994.
* Hewlett-Packard lost 1 5/8 to 69 3/8 on weaker-than-expected revenue growth in its fiscal second quarter. Home Depot fell 2 3/8 to 41 1/8 after reporting unexpectedly lower first-quarter profits.
* Genentech rose 3/8 to 47 1/4. Salomon upgraded the stock.
Some drug shares rebounded after two days of losses on profit taking. Pfizer rose 2 1/8 to 83 3/8, and Eli Lilly was up 3/8 to 70 1/8.
* Rockefeller Center Properties fell 1/2 to 4 3/4. The real estate investment trust resumed trading after having halted it last week when buildings on which the REIT holds a mortgage became entangled in a Chapter 11 bankruptcy filing.
* Insurer Crop Growers withered 11 5/8 to 12 5/8. Investors dumped the stock after the rebound in the Montana-based company’s first-quarter earnings failed to satisfy them. The company’s earnings outlook is unclear because of revisions in the federal crop insurance program.
Overseas markets were mixed. Tokyo’s 225-share Nikkei average shed 220.80 points to end at 16,388.90. In Frankfurt, the 30-share DAX average finished up 23.78 points at 2,110.52, and London’s FTSE-100 average closed at 3,300.8, off 9.9 points.
Mexico’s Bolsa index closed up 23.05 points at 2071.25.
The dollar meanwhile, moved higher against most major currencies amid speculation that proposed U.S. sanctions against Japan would help cut America’s bulging trade deficit.
In New York trading, the dollar closed at 86.60 Japanese yen, up from 86.35 on Monday. The greenback also finished at 1.444 German marks, up from 1.434 on Monday.
