FINANCIAL MARKETS : Dow Continues Its Climb, Again Hits a Record
The Dow Jones industrial average set a record Friday for the second day in a row as new evidence of a slowing economy heightened expectations of an interest rate cut by the Federal Reserve Board.
The blue-chip index rose 16.98 points to 4,825.57 on Friday, after having soared 42 points on Thursday. For the week, the Dow gained 83.82 points.
Stocks rose even as bond yields rose, apparently because some bond traders felt a Labor Department report on U.S. employment raised the threat of inflation. The report said the unemployment rate dipped to 5.5% in October, its lowest level in seven months.
However, October payroll jobs increased by 116,000, a fairly small figure and below many analysts’ expectations. Average hourly earnings rose six cents in October to $11.59.
Analysts said the mixed employment figures did nothing to change their view that economic activity is slowing after a summer spurt.
“A weakish report was more or less expected,” said James Solloway, research director at Argus Research. “Manufacturing is still on the weak side, still being hurt by the earlier inventory buildup we saw in the first half of the year.”
John Shaughnessy, Advest Corp.’s director of research, said he was “surprised” at the market’s continued strength.
“My own sense is that we’re probably in for a choppy two weeks or so until we get the budget deficit problem worked out in Washington.”
Republicans said they are ready to pass legislation that would extend the government’s spending and borrowing limits, but only with riders that would curb long-term spending.
President Clinton has said he would veto legislation that includes such riders.
Shaughnessy said he believes that after the budget matter is resolved, however, the Fed could justify cutting short-term rates again, paving the way for a year-end rally in both stocks and bonds.
“The underlying fundamentals are solid,” he said, including earnings growth and comfortable interest rates.
“People see that the economy is not running away and that rates could come down to spark a resurgence” in the stock market, said Philip Tasho, a money manager at Shawmut Investment Advisers Inc., which has $14 billion under management. “So people are moving into the perennial technology group.”
The technology-laden Nasdaq composite index jumped 8.34 points to 1,065.66 on Friday, approaching its all-time high of 1,067.40 set Sept. 13.
Applied Materials was the volume leader in Nasdaq trading. It gained 2 5/8 to 55 3/8 after Prudential Securities began coverage with a “buy” rating.
On the Big Board, IBM rose 1 7/8 to 101 1/2, and Micron Technologies rose 3/4 to 68 1/4. Silicon Graphics added 4 to 36 1/4 after First Chicago said the stock could go to 50.
Transportation issues, the other market boosters on Thursday, were mixed Friday. Delta Airlines rose 1 1/4 to 69 1/2. But Federal Express slipped 1 1/8 to 84 7/8. The Dow Jones transportation average rose 5.51 points, or 0.28%, to 11,990.95.
Among market highlights:
* EMC led in volume on the Big Board, and rose 2 to 18 1/2. The company said AT&T; and Hewlett-Packard will sell EMC’s Symmetrix 3000 open-storage system. EMC also said it expects more than $250 million in 1996 revenue from the agreement.
* Philip Morris broke the record high price of 86 5/8 it set three years ago, helping take the Dow to its new record.
* Financial stocks slipped as concern grew that more consumers could default on their loans, thus hurting those companies’ profits. The S&P; major regional bank index fell 2.17 points, or 1%, to 228.67; it peaked two weeks ago at 243.72. Among the banks feeling the effect were NationsBank, which fell 1 to 67 1/2, and Wells Fargo, down 3 5/8 to 212 1/4.
* Edison Bros. Stores filed for Chapter 11 bankruptcy protection, becoming the second major mall-based specialty retailer after Petrie Retail to seek protection in a month. Trading in the stock was halted.
In overseas trading, the Paris CAC index inched up 0.18%, but the DAX in Frankfurt slipped 0.10%, and the FT-SE 100 in London eased 0.64%. Markets in Japan were closed for Culture Day.
On New York’s Coffee, Sugar and Cocoa Exchange, March sugar rose 0.09 cent to 10.77 cents a pound after Typhoon Angela, the most powerful storm to strike the Philippines in years, ravaged the main island of Luzon, threatening sugar and coconut crops. The typhoon then headed in the general direction of coffee grower Vietnam.
