FINANCIAL MARKETS : Blue Chips End Higher as Yields Drop

Blue-chip stocks posted modest gains Friday as long-term bond interest rates took another drop, but the Nasdaq market sank under the weight of falling technology shares.

The Dow Jones industrial average closed up 12.64 points at 5,087.13. For the week, it rose 38.29 points.

In the broader market, advancing issues led decliners 1,387 to 922 on active volume of 392 million shares on the New York Stock Exchange.

The Standard & Poor’s composite index of 500 stocks and the NYSE composite index closed near all-time highs, while the Wilshire associates equity index hit a record.

The Nasdaq composite index, which is laden with high-technology shares, fell 3.89 points to 1,055.31.

“The techs are in a renewed period of weakness,” said Marshall Acuff, portfolio strategist at Smith Barney.

“We’re seeing a lot of rotation and money is coming out of techs,” said Guy Truicko, a portfolio manager at Unity Management. “It’s toward the end of the year and people want to lock in performance.”

Analysts said investors were also concerned that personal computer sales for the Christmas season may fall short of expectations.

Micron Technology fell 2 7/8 to 51 7/8, Texas Instruments lost 2 7/8 to 55, International Business Machines fell 1 3/4 to 94 7/8, Hewlett-Packard was off 1 1/8 to 81 3/4 and Microsoft fell 7/8 to 86 1/4.

In the bond market, the 30-year Treasury bond rose 22/32, or $6.875 per $1,000 in face amount, and its yield fell to 6.09%--the lowest since November, 1993--compared to 6.13% on Thursday.

Bonds were bolstered by signs of a weakening manufacturing sector and hopes that the Federal Reserve Board will lower interest rates this month or next.

The National Assn. of Purchasing Management index for November was unexpectedly lower at 46.5, compared 46.8 in October. A reading below 50 signals a contracting manufacturing sector.

“The market has clearly factored in a discount rate cut here and will be disappointed if there’s no 50-basis-point [half a percentage point] cut,” said Michael LaTronica, a director of research at Gruntal & Co.

He said there is division among Fed policy-makers over whether there is room to ease when the central bank’s policy-setting Federal Open Market Committee meets Dec. 19.

He said Fed Vice Chairman Alan Blinder and Gov. Janet Yellen have said the current monetary policy is “slightly restrictive,” while Chairman Alan Greenspan’s well-publicized key for timing his next reduction is a budget pact that addresses the deficit.

Among individual issues, Magma Copper climbed 6 3/8 to 27 5/8 after Australia’s Broken Hill agreed to pay $28 a share to acquire the giant copper producer.

Motorola lost 7/8 to 60 3/8. Morgan Stanley cut the stock to “outperform,” citing concerns about the slowdown in the U.S. cellular telephone business.

Gap fell 2 1/4 to 43 after Montgomery Securities lowered its opinion of the retailer.

Objective Systems Integrators, which develops object-oriented software, jumped 22 1/4 to 41 1/4 in its first day of trading.

Other initial public offerings also drew buying.

Meta Group, a research firm, surged 7 1/2 to 25 1/2. Westell, which develops telecommunications products, rose 10 1/4 to 23 1/4.

The Standard & Poor’s composite index of 500 stocks rose 1.61 points to a record 606.98. The American Stock Exchange index slipped 0.73 point to 536.64.

The NYSE Composite index of all listed common stocks gained 0.84 point to set a new high at 324.43. The average share was up 11 cents.

The Wilshire associates equity index--the market value of NYSE, American and Nasdaq issues--was at a new high of 5,980.595, up 10.602 points, or 0.18%.

Also, prices of soybean meal, used in animal feed, hit two-year highs at the Chicago Board of Trade amid bullish export talk and dry conditions in South American soybean fields.

Cattle prices rose in Chicago on beef sale prospects, sugar prices posted seven-month highs, and crude and heating oil rose on forecasts of cold weather.

The Commodity Research Bureau index of 21 commodities closed down 0.16 point at 241.68.

Fueling soybean meal rose on speculation that China, Europe, Japan, Iran and Russia have bought South American meal.

“We’ve seen an awful lot of trading in South America. I think China is booking a lot of it and Iran too,” said one U.S. soybean meal exporter, who relayed talk that 100,000 metric tons may have been sold to China for December-to-January shipment.