FINANCIAL MARKETS : Dow Is Off 3.80; Yields Edge Higher
The financial markets took a breather Friday, with stocks drifting lower as bond yields edged higher.
The Dow Jones industrial average declined 3.80 points to 4,585.84, after recovering most of a 17-point loss posted early in the session. The blue-chip index still managed a gain of 75.05 points for the week and closed a hair below its all-time closing high of 4,589.64, posted Thursday.
In the Treasury market, the 30-year bond yield rose from 6.47% to 6.49% after bond investors interpreted a surprising surge in orders for durable goods as a rare sign of economic strength. The long bond’s price, which moves in the opposite direction, was off 11/32 point, or about $3.44 per $1,000 in face value.
On Wall Street, declining issues led advancers by more than 3 to 2 on the New York Stock Exchange. Volume on the Big Board was moderately heavy at 318.63 million shares, down from Thursday’s 422.02 million.
Broad market indexes were also lower, despite continued strength in computer issues.
The NYSE’s composite index fell 0.76 point to 294.17, and the Standard & Poor’s 500-stock index fell 1.36 points to 549.71. The Nasdaq composite index fell 1.22 points to 938.87. The American Stock Exchange’s market value index fell 2.49 points to 493.48.
Stocks stumbled early along with bonds, after the Commerce Department said orders to U.S. factories for big-ticket durable goods surged 2.5% in May.
That was the first advance in four months and the biggest jump since November. Economists had expected the number to be flat.
Initially, the data threw cold water on investors’ hopes that the economy was slowing fast enough to warrant an interest rate cut by the Federal Reserve Board. Stocks had been firm all week on the hopes that the Fed would ease credit as early as July 5, the start of its next policy meeting.
Stocks trimmed their losses and bond yields edged back down after analysts decided the data didn’t look that bad.
“The market looks phenomenal,” said Bob Walberg, MMS International’s market analyst. “We continue to see expansion of the participation in the rally. Nasdaq has been very strong, as have the other secondary markets.”
Stock losses Friday were also minimized by continued end-of-the-quarter window-dressing by investment managers who want to get high-performing issues, such as technology stocks, into their portfolios before they have to release quarterly progress reports.
Among Friday’s highlights:
* Adobe Systems shed 4 1/4 to 61 1/4 after traders viewed the company’s $500-million bid for Frame Technology Corp. as too high.
* i-STAT soared 10 7/8 to 38 1/2 after Hewlett-Packard said it would buy a 14% stake in the company for $61 million.
Paper stocks, for example, were higher on active trading. Champion International rose 2 to 54 1/2. The company announced a stock buyback Thursday.
Takeover rumors boosted some issues. Scott Paper rose 1 1/8 to 48, and Kimberly-Clark rose 2 1/4 to 62 1/2, after a Wall Street Journal report that the two companies are contemplating a merger. But the shares of rival Procter & Gamble, which analysts said would face even tougher competition from a merged company, fell 2 to 71 1/4.
* Coram Healthcare fell 1 3/8 to 17 1/8 after Lincare Holdings said late Thursday that it would indefinitely postpone a shareholder vote on a proposed merger with Coram.
* Masco fell 1/2 to 25 1/2 after announcing late Thursday that its second-quarter net income would be 10% to 15% below the 44-cent results of a year ago.
Overseas markets were mixed. Tokyo’s 225-share Nikkei average jumped 338.81 points to 15,265.18. Germany’s 30-share DAX average index ended at 2,139.78, down 8.90 points, and London’s FTSE-100 average closed 24.4 points lower at 3,379.4.
Mexico’s Bolsa index closed up 5.5 points at 2,053.17.
Meanwhile, the dollar fell sharply against the mark and most other currencies Friday after three big German states reported higher inflation, which doused hopes that Germany’s central bank would cut interest rates.
In New York, the greenback ended the week at 1.386 German marks, down from 1.397 on Thursday. It was also trading at 84.30 Japanese yen, down from 84.55.
