Oil Price Surge Sends Yields Up; Stocks Rise Slightly
A fresh surge in oil prices weakened demand for Treasury securities Friday, sending yields higher as investors worried that higher fuel costs would cause inflation in the broader economy.
Stocks, however, shrugged off the news and edged slightly higher in very light trading.
Pressuring the bond market was a $2.6-billion offering of corporate bonds by Walt Disney to help finance its purchase of Capital Cities/ABC. Wall Street brokers in the huge deal sold government bonds to try to hedge their risk.
The yield of the Treasury’s main 30-year bond rose to 6.64% from 6.62% late Thursday.
Oil prices have risen a stunning 30% in the last two months, but the bond markets’ reaction to any perceived threat of increased inflation had largely been muted.
The Dow Jones industrial average rose 9.76 points to 5,636.64. The Dow rose more than 20 points at the open, quickly gave back those gains, then slogged higher through the remainder of the session. The Dow added 51.67 points for the week, which began with a 98.63-point surge Monday to a record 5,683.60.
Advancing issues outnumbered decliners by 4 to 3 on the New York Stock Exchange. Volume was light by recent standards, at a revised 329.64 million shares as of 4 p.m., down from Thursday’s light pace.
Broad-market indexes ended higher.
The Russell 2000 index of small-company stocks climbed 0.61 point to 329.48, a record closing high.
Stock traders were breathing a sigh of relief Friday after weeks of high anxiety.
“This is a rare quiet Friday,” said Phil Erlanger, who runs his own stock research firm in Acton, Mass. He said he took the opportunity to assess the past 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.”
“We had such a powerful move Monday,” added Larry Wachtel, market analyst at Prudential Securities. “There was this sense of ‘well, what do you do for an encore?’ The rest of the week was spent consolidating those gains.”
The market traded on a sector-by-sector, even stock-by-stock, basis.
Among market highlights:
* Computer stocks, which had been beaten down for several days, ended mixed. On the Big Board, 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.
In Nasdaq trading, Microsoft rose 5/8 to 101 3/8 and Intel rose 7-16 to 56 5-16.
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. Glaxo Wellcome’s American depositary receipts fell 1/4 to 24 7/8 in leading volume on the Big Board, followed by Merck, down 2 to 63 1/2, and Eli Lilly, down 1 3/4 to 64 7/8.
Most oil stocks followed crude oil prices higher, with Exxon adding 7/8 to 81 3/8, Texaco up 5/8 to 84 3/4 and Atlantic Richfield up 1 1/8 to 114 1/2. But Chevron fell 3/8 to 55 1/4.
* Philip Morris shares lost 1/2 to 86 1/4, after posting sizable losses since last week. 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.
* General Motors fell 1/4 to 53 3/8. United Auto Workers union members approved a strike settlement in Dayton, Ohio, on Friday and began returning to their jobs. A walkout at two Ohio plants halted production at 26 of GM’s 29 North American assembly plants and idled more than 177,000 of its workers. Many GM suppliers were also shut down as a result.
In overseas stock markets, the 225-share Nikkei index in Tokyo eased 0.1%, after seeing five consecutive gains. Frankfurt stocks ended mixed, and share prices in London ended higher after they fell in the morning on the heels of Wall Street’s loss Thursday.
Market Roundup, D4
