FINANCIAL MARKETS : Dow Gains 36.98; Bond Yields Fall
Bonds rebounded as yields fell to the lowest level in seven weeks with reports on labor and manufacturing renewing hope that economic growth and inflation will not accelerate. Stocks surged, and the dollar edged higher against the yen.
The yield of the benchmark 30-year Treasury bond fell to 6.61% from 6.65% on Thursday. Friday’s yield was the lowest since July 14.
The Dow Jones industrial average jumped 36.98 points to 4647.54, and the Standard & Poor’s 500 index climbed 1.97 points to 563.84, but the Nasdaq composite index slipped 0.61 point to 1019.50.
In late New York trading, the dollar fetched 97.55 yen, up from 97.34 yen late Thursday.
Fueling investor optimism among bond investors was a National Assn. of Purchasing Management index of manufacturing conditions, which sank to 46.9 from 50.5 in July. Readings of less than 50 suggest a contraction in manufacturing.
“The bottom line is that the economy is not speeding up,” said Mark Taborsky, who manages $280 million of bonds at Abacus Financial Group in Chicago. “We can look for lower growth over the next two quarters, and bond yields are going to 6%.”
In a seesaw session, bond yields at first rose as high as 6.71% after the government’s August employment report hinted that the economy was “back on its feet,” said Michael Strauss, chief economist at Yamaichi International. The government said U.S. payrolls swelled 249,000 in August, more than the 145,000 gain economists expected.
Stocks, meanwhile, jumped amid optimism that the economy is growing enough to keep profits healthy through the end of the year. Gains in auto shares overshadowed a slump in technology issues as the jobs report boosted confidence that consumers will have more money to spend in the last four months of this year.
“It’s kind of the best of all possible worlds,” said David Rolfe, chief investment officer of Wedgewood Partners Inc. in St. Louis, which manages $60 million in assets. “Employment is decent and inflation is low. Let’s resume the bull market.”
Advancing issues led decliners by about 11 to 7 on the New York Stock Exchange. Big Board volume was relatively light in pre-holiday trading, dipping to 255.72 million shares as of 4 p.m. from 300.9 million on Thursday.
Broad-market indexes lagged blue chips but managed some gains, as technology stocks turned in a mixed performance.
The American Stock Exchange’s market value index added 1.20 points to 535.66, topping its closing record set on Thursday. The NYSE composite index rose 1.23 points to 303.23.
Among Friday’s highlights:
* J.P. Morgan was the biggest gainer among the Dow industrials, rising 2 to 74 7/8.
* Cyclical stocks made a good showing. Boeing was second among Dow components and rose 1 5/8 to 65 3/8. General Motors was third and rose 1 3/8 to 48 3/8. Auto stocks rallied based on hopes for good August sales figures, which were reported after the close of trading. Ford rose 1/2 to 31 1/4, and Chrysler added 3/4 at 54 1/2.
* Technology stocks turned lower. On the Big Board, IBM fell 3/4 to 102 5/8, Compaq slid 7/8 to 46 7/8, and Micron Technology lost 1/2 to 76 3/8. In Nasdaq trading, Intel fell 1/2 to 60 7/8. Microsoft shares dropped 2 3/4 to 89 3/4 in leading Nasdaq volume, after reports that the software maker’s new Windows 95 program can be ruined in some cases by a virus.
In commodities trading, cotton futures rose sharply, driven up by renewed concern that pests are devouring the cotton crop.
Cotton prices have risen 20% in the past three weeks and are in sight of last year’s historical highs exceeding $1 a pound. December closed 1.9 cents higher at 85.67 cents a pound.
Trading on most commodity markets slowed going into the holiday weekend. Lower gold and silver prices were offset by higher oil prices, as the Commodity Research Bureau index of 21 commodities rose 1.33 points to 241.22.
December gold fell $2 to $380.90 an ounce.
Analysts said this week’s decline in silver prices finally caught up to gold. December silver settled 4.0 cents lower at $5.35 an ounce.
“The weakness in silver finally affected gold,” said George Milling-Stanley of Lehman Brothers. “They’ve decided silver is definitely going down.”
Overseas stock markets ended mixed. Tokyo’s Nikkei index ended ahead 3.51 points at 18,120.73.
In Mexico, the Bolsa index closed 36.90 points higher at 2,516.99, ending above the key 2,500 point level for the first time in more than two weeks.
In London, the FTSE-100 index finished 31.6 points higher at 3,509.4, but still down 15.5 from last Friday.
