FINANCIAL MARKETS : Stock Indexes Again Hit New Highs as Bond Yields Tumble
Wall Street shattered more records Monday as signs of lower inflation and interest rates continued to encourage investors to spruce up their portfolios by year’s end.
“The slow-growth, low-interest-rate environment is great for stocks,” said Arthur Micheletti, investment strategist at Bailard, Biehl & Kaiser in San Mateo, Calif.
“It’s the start of end-of-year buying,” said Barbara Marcin of Citibank Global Asset Management.
The Dow Jones industrial average set a record for the fourth straight session, up 22.04 points to 5,070.88. The Standard & Poor’s 500-stock index also finished at an all-time high, 601.32 points, although the Nasdaq composite index fell 0.85 points to 1,029.32, erasing most of its gains after technology shares weakened in late trading.
Advancing issues led decliners by 11 to 9 on the New York Stock Exchange.
Bond yields fell 0.02 percentage point to 6.22% after a weaker-than-expected report on sales of existing homes. Sales dropped 1.9% in October, the first decline in six months and came despite falling mortgage rates. Bond analysts believe that next month the Federal Reserve Board will cut interest rates to stimulate economic growth.
Also influencing bonds Monday was the dollar, which traded higher against the German mark on expectations of lower interest rates in that country. The mark fell against all major European currencies and the yen during thin trading. In addition, the mark fell against a rallying Swedish krona following weekend reports that Sweden is going to join the European exchange rate mechanism.
Among market highlights:
* Speculation of a U.S. rate cut helped push ahead banking, brokerage and utility stocks, all of which are interest-rate sensitive. J.P. Morgan rose 7/8 at 77 7/8 and Morgan Stanley gained 5/8 at 84 3/8.
* Technology stocks, which have been highly volatile lately, weakened late in the day, erasing most of the gains made in early trading. In Nasdaq trading, Applied Materials fell 1/4 at 42 1/8, Sun Microsystems was down 2 1/4 at 77 1/4 and Intel dropped 3 at 60. On the Big Board, Micron Technology slipped 3/4 at 48 5/8 and Compaq was down 1 3/8 at 46 7/8.
* Disney added 3/8 to 62 7/8. Its “Toy Story” had the highest weekend movie ticket sales.
* PaineWebber cut the Big Three auto makers to neutral from attractive, saying there was no clear direction in the U.S. vehicle cycle and inventory levels were too high. GM slipped 5/8 to 49, Ford fell 1/4 to 28 7/8 and Chrysler fell 3/8 to 51 7/8.
* First Alert shares lost more than a third of their value, tumbling 5 1/8 to 8 1/2 after the company said it expected 1995 sales to be flat compared to last year. Smith Barney downgraded the stock.
In overseas trading, the Nikkei index in Tokyo gained 1.8%, the FTSE-100 index in London was up 0.7% to a record high and the DAX index in Frankfurt rose 1.8%.
Crude oil prices hit five-month highs Monday on fears of an oil workers’ strike in Venezuela and OPEC’s agreement last week to maintain rather than increase export quotas, traders said.
At the New York Mercantile Exchange, crude oil and product futures ended sharply higher as trading resumed after Nymex’s closure Thursday and Friday for the Thanksgiving holiday.
January crude ended up 42 cents at $18.38 a barrel, after setting a new five-month high for the contract at $18.39.
Cocoa futures fell nearly 4% to six-week lows after peaceful election proceedings in the Ivory Coast, the world’s largest cocoa producer, allayed lingering concerns that the country’s cocoa exports would be interrupted.
March cocoa closed $53 a metric ton lower at $1,320 a ton.
