Oil Surge Worries Bonds; Stocks Gain in Slow Session
A fresh surge in crude oil prices helped push bond yields up modestly Friday on renewed inflation worries, while the stock market ended mostly higher in mysteriously light trading.
Treasury bond yields, which languished for much of the day, turned up near the close, pushing the bellwether 30-year T-bond yield to 6.64% from 6.62% on Thursday. Shorter-term yields also rose.
On Wall Street, the Dow industrial average added 9.76 points to 5,636.64, bringing its net gain for the week to 51.67 points. The Dow had rocketed 98.63 points on Monday to a record 5,683.60, before pulling back at midweek.
Winners topped losers by 13 to 10 on the New York Stock Exchange on Friday, but trading volume was a relatively scant 329 million shares, the lowest since mid-January.
Analysts couldn’t explain the slow session, two weeks before the Easter and Passover holidays. “This is a rare quiet Friday,” said Phil Erlanger, who runs his own stock research firm in Acton, Mass.
Commodity markets stole the spotlight, with crude oil refusing to halt its recent rally. May oil futures on the New York Merc jumped 90 cents to $21.95 a barrel.
Oil prices have been soaring in recent weeks because of tight supplies, as many refiners have held off restocking inventories on expectations that Iraq would soon be permitted to sell its oil again, depressing market prices.
But a deal between Iraq and the United Nations has been stymied, and the cold U.S. winter has left some refiners scrambling for oil.
The latest jump in crude helped send the Commodity Research Bureau index of 17 key commodities up 0.6% to a seven-year high.
Worries about potential inflation because of rising commodity prices helped spook some bond traders, analysts said. Investors also are nervous ahead of the Federal Reserve Board’s meeting Tuesday, although the Fed is expected to keep short-term rates unchanged.
In addition, traders said some investors sold Treasuries late Friday to make room for bonds offered by Walt Disney in a $2.6-billion issue floated to help finance its purchase of Capital Cities/ABC.
In the stock market, meanwhile, there were few broad trends. But analysts noted that the Russell 2,000 index of smaller stocks rose 0.61 point to a record 329.48, suggesting growing strength in lesser-known issues.
Erlanger said he took the opportunity Friday to assess the last several weeks, “and the thing that I see is that the stock market had plenty of opportunity to really have that 10 to 15% correction that everybody was looking for, and it just doesn’t do it.
“You’ve got rising interest rates, the tech stocks . . . getting roiled, and yet the stock market just holds together.”
However, some traders warned that more companies might pre-announce disappointing first-quarter earnings next week, further riling the market.
Among Friday’s highlights:
* Computer stocks, which had been beaten down for several days on earnings concerns, ended mixed. IBM fell 5/8 to 114 1/4, but Digital Equipment rose 1 1/8 to 54 3/8. Compaq fell 1/4 to 37 3/4, but Hewlett-Packard climbed 2 1/4 to 97.
Adobe Systems lost 2 7/8 to 31 3/8. First-quarter earnings were in line with expectations, but the software maker said Hewlett-Packard would stop using Adobe’s PostScript software in some of its computer printers next year.
* Drug stocks pulled back from Thursday’s strong gains. Merck lost 2 to 63 1/2, Eli Lilly fell 1 3/4 to 64 7/8 and Warner-Lambert eased 7/8 to 104 5/8. But some biotech issues rose, including Amgen, up 1 to 62 3/4; Biogen, up 1 to 63; and Immulogic, up 1 7/8 to 12 1/2.
* Oil stocks were mixed. Exxon gained 7/8 to 81 3/8, Atlantic Richfield jumped 1 1/8 to 114 1/2 and Benton Oil jumped 1 1/8 to 16, but Phillips lost 1 1/8 to 38 1/4 and British Petroleum was off 1 to 104.
* Philip Morris renewed its decline, losing 1/2 to 86 1/4. The leading U.S. tobacco company has been hit hard amid allegations that the industry manipulated the nicotine levels in cigarettes to get smokers hooked. Philip Morris has started to run defensive advertising.
In other commodities trading, May soybean futures in Chicago jumped 8.75 cents to $7.30 1/2 a bushel, boosted by the gains in soybean meal, a rumor China was seeking to buy and reports that rain in South America was slowing the harvest there.
Market Roundup, D4
