Yields Drop to 6 1/2-Month Low on New Data
Long-term interest rates plunged to the lowest levels in more than 6 1/2 months Tuesday and blue-chip stocks closed with strong gains as the latest economic reports calmed inflation jitters.
The Dow Jones industrial average went back above 6,000, ending 34.29 points higher at 6,007.02 and the Standard & Poor’s 500 went back above 700, ending up 4.24 points at 701.50. In the broader market, advancing issues led decliners 1,292 to 1,142 on active volume of 441 million shares on the New York Stock Exchange.
But the Nasdaq composite index fell 12.84 points to 1,203.05, and the American Stock Exchange’s market value index fell 0.66 point to 565.89. Both indexes are dominated by technology and other volatile shares that investors are shying away from. Salomon Bros. said there has been a softening in retail computer sales over the last few weeks.
The yield on the benchmark 30-year Treasury bond sank to 6.68%--its lowest level since April 4. It was at 6.83% on Monday.
“The bond market liked the economic data and pulled stocks along with it to a point,” said Bob Stovall, president of Stovall/21st Advisers. But Stovall did not see continued gains any time soon. “There’s an overhanging fear of a one-party leadership as of next Tuesday, and that will weigh on stocks no matter what the day-to-day news is,” said Stovall.
Financial markets were buoyed by a smaller-than-expected rise in the government’s index of workers’ compensation for the third quarter; it rose 0.6% after seeing a 0.8% gain for the previous three months. Also boosting sentiment was a fall in the consumer confidence index.
“People are thinking no Fed tightening for the rest of the year and after the first of [next] year, there might be thinking of a Fed loosening,” Michael LaTronica, director of research at Gruntal & Co., said about investors’ thoughts on whether the Federal Reserve Board might raise interest rates this year or early in 1997.
Among market highlights:
* Interest-rate sensitive shares bounded higher, with Wells Fargo up 3 5/8 to 264 1/8, Freddie Mac up 2 1/8 to 99 3/8 and Citicorp jumped 2 3/8 to 97 3/8.
* Among the technology stocks to fall were CompUSA, down 5 7/8 to 51 1/2; Tandy, down 1 to 39; Compaq, off 3 1/8 to 67 1/2; and Dell, off 4 7/8 to 76 1/8.
* America Online rose 1 1/8 to 25 3/4 after introducing a new corporate structure and pricing plans to make the computer services company more competitive.
* Cosmetic giants Revlon and Estee Lauder announced higher third-quarter profits. Revlon stock gained 7/8 to 34 1/8, but Lauder fell 5/8 to 43 7/8.
* Donna Karan lost 3 1/2 to 15 1/4. The fashion design company forecast break-even fourth-quarter results, citing weakness at its beauty division.
* DSP Communications tumbled 17 1/8 to 35 1/4 after announcing plans for a $400-million merger with Proxim, whose stock rose 2 51/64. to 21 1/2.
Overseas, Tokyo’s Nikkei-225 stock average rose 0.3%, Frankfurt’s DAX index fell 1.1% and London’s FTSE-100 fell 0.8%.
Oil prices fell as traders bet that low inventories of heating oil were finally starting to show increases ahead of winter.
Heating oil prices tumbled on expectations the American Petroleum Institute will show a build-up in stocks of heating oil and diesel fuels in weekly oil inventory data.
Heating oil for November delivery fell 1.63 cents to 69.83 cents a gallon at the New York Mercantile Exchange. November unleaded gasoline fell 1.20 cents to 69.10 cents a gallon, and December crude oil lost 51 cents to $24.34 a barrel.
