FINANCIAL MARKETS : 30-Year Bond Yields Dip; Dow Edges Up
The Treasury market rebounded smartly Thursday as traders and investors grew confident that key employment statistics due out today will suggest moderate economic strength with little threat of inflation. Stocks edged higher, and the dollar fell against the Japanese yen.
The yield on the Treasury’s main 30-year bond dropped to 6.65% from 6.69% late Wednesday, sending their prices up. Shorter-term maturities posted smaller price gains.
Contributing to the market optimism about the upcoming Labor Department data were fresh reports of weak Chicago-area business activity and sluggish chain-store sales.
Other data Thursday painted a decidedly mixed picture of the economy. But large investors such as mutual fund managers apparently brushed aside those numbers, snapping up intermediate- and long-term securities in a move to lengthen the duration of maturities in portfolios by the end of the month.
Signs of economic strength generally prompt investors to sell bonds, whose fixed-interest payments are eroded by inflation over the life of the security.
For its part, the employment report is expected to show that 158,000 jobs were created in August, but forecasts vary widely. Still, a jobs number substantially higher or lower could prompt a sharp market reaction.
The other significant report due out today is a broader survey of U.S. business conditions by a national purchasing managers’ group.
Yields on three-month Treasury bills were lower at 5.43% as the discount dropped 0.01 percentage point to 5.28%. Six-month yields were lower at 5.50% as the discount fell 0.02 point to 5.28%. One-year yields fell to 5.62% as the discount fell 0.01 point to 5.32%.
Yields are the interest bonds pay by maturity, whereas the discount is the interest at which they are sold.
The federal funds rate, the interest on overnight loans between banks, was quoted at 5 7/8%, down from 6% late Wednesday.
Stocks edged higher in quiet trading. The Dow Jones industrial average rose 5.99 points to 4,610.56. Advancing issues led decliners by more than 4 to 3 on the New York Stock Exchange, but a large number of issues were unchanged from Wednesday’s close.
Volume was a fairly brisk 300.9 million shares on the Big Board, down from 329.78 million on Wednesday.
“There’s really not all too much right now to get excited about,” said James Solloway of Argus Research. “Interest rates are pretty steady, the economy is growing sluggishly, the Federal Reserve may cut [interest] rates before the end of the year, but nobody expects the plunge in . . . rates that we had in the first half of this year.”
Broad-market indexes finished higher. The NYSE composite rose 0.60 point to 302.00. The Standard & Poor’s 500-stock index rose 0.96 point to 561.88.
The Nasdaq composite index climbed 7.50 to 1,020.11, and the American Stock Exchange’s market value index added 0.45 point to 534.46.
The dollar, meanwhile, skidded amid a surprise selloff in Asia as the trading day began.
There was no recovery as the day progressed, and investors cashed in on earlier gains by selling dollars.
In late New York trading, the dollar fetched 97.34 Japanese yen, down sharply from 99.01 yen late Wednesday.
Among Thursday’s market highlights:
* Technology stocks were prominent gainers, recouping stiff losses suffered earlier this week. On the Big Board, IBM rose 1 3/4 to 103 3/8, Compaq gained 1/2 to 47 3/4, and Micron Technology surged 3 5/8 to 76 7/8.
* In Nasdaq trading, Intel rose 1 to 61 3/8, Cisco Systems added 1 3/8 to 65 5/8, and Adobe Systems climbed 1 1/2 to 51.
* Retail shares were mixed amid mostly disappointing August sales reports. Wal-Mart fell 3/8 to 24 1/2 after the nation’s biggest retailer said August sales in stores open at least a year rose 3.4%, well below the usual pace.
