FINANCIAL MARKETS : Another Dow Record as Fear of Default Eases
The Dow industrials inched further into record territory Monday, following a rally in the bond market, as fears faded that the government will default on the nation’s debt. But broad market indexes lost ground.
The Dow rose 2.53 points to 4,872.90, setting a record for a fourth straight session. The blue-chip index seesawed for most of the trading day, hovering at slightly depressed levels right before the close and then pushing ahead.
Wall Street seemed to ignore the battle between the White House and Congress over the budget and the fast-approaching $4.9-trillion debt limit, focusing instead on the financial maneuvers of the Treasury Department to avoid default after President Clinton vetoed a bill that would have raised the government’s borrowing authority. Treasury Secretary Robert E. Rubin announced that the government was revising its debt auction schedule over the next week to allow it to pay $102 billion of interest and principal due Wednesday and Thursday. It will sell $137 billion in new securities during the next nine days, more than enough to pay off what’s due. The Treasury also said it may tap a $21-billion retirement investment fund for federal government employees or the $350-billion Civil Service Retirement and Disability Fund.
The benchmark 30-year Treasury bond rose more than 3/4, or $7.50 on a $1,000 bond, lowering its yield to 6.27% from 6.33% on Friday.
The dollar also gained ground after Rubin’s announcement. A default would curb demand for U.S. bonds and the dollars needed to buy them.
“The dollar has rallied pretty much on” the Treasury plan, said James Kemp, senior currency trader at Citibank.
The dollar closed at 101.90 yen, up from 100.93 yen on Friday in New York.
On the New York Stock Exchange, declining issues led advancers by about 6 to 5. Big Board volume totaled 295.84 million shares, compared to 298.69 million on Friday.
Broad market indexes fell. The NYSE’s composite index slipped 0.15 point to 315.63, the Standard & Poor’s 500-stock index dropped 0.42 point to 592.30, and the American Stock Exchange’s value index fell 0.57 point to 530.43.
The Nasdaq composite index fell 5.41 points to 1,058.46, coming under pressure from a decline in technology stocks.
Concerns over a default weighed down the market for most of Monday’s session.
The current battle in Washington further dampened hopes that the Federal Reserve Board’s Open Market Committee will take any action on interest rates at its meeting Wednesday.
Among market highlights:
* Oil stocks rose following an explosion in a military building in Saudi Arabia and talk of a possible oil embargo against Nigeria in response to the executions last week of nine democracy activists. Exxon gained 7/8 to 76 3/8 and Amerada Hess added 1/4 to 48.
* Transportation stocks also fell on the news, with Burlington Northern Santa Fe down 5/8 at 80 5/8, Delta Air Lines dropping 1 1/4 at 69 7/8 and Federal Express slipping 1 1/8 at 82 1/2.
* Technology stocks slipped. Sun Microsystems was down 5 at 84 7/8, Quarterdeck fell 1 1/4 at 32 7/8 and Applied Materials slipped 2 at 49 7/8.
In foreign trading, Mexican stocks extended their midday losses and closed sharply lower Monday, down 56.03 points at 2,254.07. The peso closed lower at 7.82 per dollar.
