Stocks Jump as Yields, Futures Fall
Bond yields and commodity prices plunged Thursday, helping stocks post solid gains as evidence of a moderating economy reassured investors that inflation is not threatening.
Oil prices led a rout in energy markets, with crude falling nearly a dollar a barrel because of a renewed possibility of Iraqi oil sales.
Corn and soybean prices also fell sharply as weather reports indicated this fall’s harvest would come in bigger than expected.
“This is meltdown,” said broker Tim Holmes at MeesPierson Derivatives. “It’s more than your average correction.”
The oil move was sparked by news that rival Kurdish factions agreed to extend a U.S.-brokered cease-fire.
Gold and silver prices also fell. “There’s little incentive for investors in precious metals or commodities in general right now,” Smith Barney analyst Phil Tiger said.
The Knight Ridder Commodity Research Bureau index of 17 futures fell 3.83 points to close at 237.83, down 1.6% and at its lowest since October 1995. December crude oil closed 93 cents a barrel lower at $23.35, with November unleaded gasoline down 3.44 cents at 66.56 cents.
Bond yields fell on news of a smaller-than-expected increase in consumer spending and a higher-than-expected number of jobless claims. On Wednesday the fall in U.S. third-quarter economic growth to an annual 2.2% pace had already suggested the economy was slowing softly.
The yield of the benchmark 30-year bond fell to 6.64% from 6.70% on Wednesday. The 30-year Treasury hasn’t finished a session with a yield that low since early April.
U.S. stocks rose, paced by household goods makers Procter & Gamble and Clorox.
“People believe that this economy is slowing in a way that has the market thrilled,” said John Hammerschmidt, a fund manager at Turner Investment Partners. “Between rates and the economic numbers, it paints a great picture for the consumer stocks.”
“The market came out of a slumber and started to rally on these lower commodities,” said Waldo Best, a senior economist with Barclays de Zoete Wedd Securities Inc. in New York.
Broader stock measures posted their best gains in weeks, with technology, financial and health-care issues joining consumer stocks with significant gains.
The Dow Jones industrial average ended up 36.15 points at 6,029.38. In the broader market, advancing issues led decliners 1,462 to 929 on heavy volume of 482 million shares on the New York Stock Exchange.
The Standard & Poor’s composite index of 500 stocks gained 4.37 points to 705.27. Analysts said traders were also happy at what they view as the increasing unlikelihood that Democrats would take control of both house of Congress in next Tuesday’s elections.
Among active issues, Campbell Soup shed 3 to 80 after the company said the grandson of the company founder sold about 9 million shares. In recent months, John Dorrance III has been selling huge blocks of Campbell stock, according to filings. Campbell Soup said that was the largest single trade of its stock in its history.
Among market highlights:
* The shares of big oil companies fell as crude oil sank. Among losers, Royal Dutch Petroleum dropped 3 3/8 to 165 3/8 and Texaco lost 1 3/8 to 101 5/8.
* The fall in the price of oil helped airline stocks, including American Airlines’ parent AMR, which was up 3 1/8 to 84, United Airlines’ parent UAL, up 1 7/8 to 47 3/8 and Delta up 2 1/8 to 70 7/8.
* Computer stocks were broadly higher, rebounding from recent declines. IBM rose 2 5/8 to 129 and Compaq was up 1 3/4 to 69 5/8. Among other technology shares, Cisco Systems rose 3 3/4 at 61 7/8, Intel rose 3 1/8 to 109 7/8 and Sun Microsystems rose 2 1/8 to 61. Some analysts attributed the day’s strength in computer-related shares to a report late Wednesday predicting the global semiconductor market will grow 7.4% next year and resume its double-digit rate in 1998.
* Swedish-American drug maker Pharmacia & Upjohn lost 1 3/4 to 36 after reporting lower earnings.
Overseas, Tokyo’s Nikkei stock average fell 1.0%, Frankfurt’s DAX index fell 0.7% and London’s FTSE-100 fell 0.4%.
