FINANCIAL MARKETS : Blue Chips Up Modestly as Yields Drop
Blue-chip stocks posted modest gains Friday as long-term bond interest rates fell again, but the Nasdaq market sank under the weight of falling technology shares.
The gains extended the surge that carried the Dow Jones industrial average up 319 points, or 6.7%, in November--the biggest monthly gain this year.
All U.S. stock indexes are near all-time highs. Indeed, the index that looks at almost every traded company--the Wilshire associates equity index, or Wilshire 5,000--closed at another all-time high Friday: 5,680.60.
But the Nasdaq composite index, which is laden with high-technology shares, fell 3.89 points to 1,055.31.
In the bond market, the 30-year Treasury bond yield fell to 6.09%--the lowest since November, 1993--compared to 6.13% on Thursday. Traders continue to believe that the Federal Reserve Board will lower interest rates this month or next, although that assumes a solid budget agreement in Washington.
“There is continued talk of rates coming down worldwide,” said Larry Rice, chief investment officer at Josephthal, Lyon & Ross, “although . . . any cut in rates is already [reflected] in our bond market.”
Yields fell after the National Assn. of Purchasing Management index for November was reported at an unexpectedly lower 46.5, compared to 46.8 in October. A reading below 50 signals a contracting manufacturing sector.
Foreign investors have diverted funds from European capital markets to tap the recent boom in U.S. stocks and bonds, dealers say. Because much of that investment is funded by switching into dollars from other currencies, the dollar is getting a boost. Anxiety about Europe is also helping the dollar, which rose against most currencies Friday.
France is enduring major labor unrest, and the market widely expects Germany, Britain and Switzerland to cut interest rates shortly, which should benefit the dollar.
In the United States, stocks of personal computer makers fell after the Wall Street Journal reported that holiday computer hardware sales may be disappointing, and the Washington Post reported that Fidelity’s Magellan, the largest U.S. stock mutual fund, had been selling technology stocks.
Also, Guy Truicko, a portfolio manager at Unity Management said, “It’s toward the end of the year and people want to lock in performance.”
Among the market highlights:
* 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.
* Compaq fell 1 5/8 to 47 3/4, Digital Equipment lost 1 to 57 7/8, Gateway 2000 slid 1 to 26 5/8 and Dell gave up 3 1/2 to 40 3/4.
* Apple Computer fell 1/2 to 37 5/8. The company said it would cut prices up to 25% on some of its models.
* Banking and other financial stocks rose in anticipation of lower interest rates. Citicorp rose 5/8 to 71 3/8. Bankers Trust rose 2 1/4 to 67 1/8 after a London court ruled in its favor in a derivatives case. Banc One gained 5/8 to 38 7/8, Wells Fargo shares jumped 2 3/4 to 213 and First Fidelity Bancorp climbed 1 5/8 to 75.
* Some deep cyclical issues, which some investors believe could benefit the most from lower interest rates, led the Dow higher, including United Technology, up 1 3/8 at 95 1/8; DuPont, up 1 1/8 at 67 5/8, and General Motors, up 7/8 at 49 3/8.
* Gap fell a second day after Montgomery Securities lowered its opinion of the retailer. Shares dropped 2 1/4 to 43.
* Objective Systems Integrators, which develops object-oriented software, jumped 22 1/4 to 41 1/4 in its first day of trading. Other initial offerings did well. 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.
* Food stocks, a classic recession-proof investment, performed well, with General Mills gaining 7/8 to 56. But household products, which also tend to do well in bad economic times, fell. Procter & Gamble lost 1 3/4 to 84 3/4. Dial fell 7/8 to 26 1/8.
Overseas, the Nikkei-225 average in Tokyo ended at a 45-week high, up 88.68 points at 18,833.10, a gain of 617.87 points for the week. Most European markets also rose, and Mexico’s Bolsa index was back over the 2,700 mark, ending the day at 2,703.42.
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.
Also, there was speculation that China, Europe, Japan, Iran and Russia have bought South American meal.
Crude and heating oil futures closed higher amid forecasts for cold weather stretching across the Midwest next week. The cold spell may increase demand for heating oil.
Early gains were fueled by a rumor, which proved false, that Saudi King Fahd had died.
