Dow at Record; Yields Fall to an 8-Month Low
Wall Street’s weeklong celebration of election day continued Thursday as interest rates fell to an eight-month low in the bond market, boosting the Dow Jones industrial average above 6,200 for the first time.
The Dow industrials rose 28.33 points to 6,206.04, and broader measures also hit record highs.
Investors have been in a bullish mood since voters reelected President Clinton and maintained a Republican majority in Congress. “We’re still recognizing all the good things in the election,” Dean Witter chief investment strategist Peter Canelo said. “There’re better hopes of deficit reduction.”
A successful Treasury bond auction and news that there was an unexpected decline of $2.6 billion in consumer debt in September helped push bond yields lower. The credit report suggests that consumers may be reducing their spending, which accounts for a big part of the U.S. economy. Lower interest rates affect corporate borrowing costs and company profits.
The benchmark 30-year Treasury bond yield slumped to 6.53% from 6.62% on Wednesday, after unexpectedly strong demand at the regular auction. The Treasury auctioned $10 billion in new 30-year bonds, the last leg of this week’s quarterly debt refinancing by the federal government.
Lower interest rates in the U.S. also hurt the dollar, which was down almost 2 yen in Thursday’s overseas session. In late New York trading, the dollar cost 111.60 yen, down 2.33 yen from Wednesday.
The yen reversed its recent slide after a Japanese newspaper reported that Eisuke Sakakibara, head of the International Finance Bureau of Japan’s Ministry of Finance, said that “the process of correcting the overvalued yen is about over.” (See Investor Spotlight, D7.)
Analysts said the dollar’s retreat fueled concerns on Wall Street that the Group of 3--the world’s three major economies, Japan, Germany and the U.S.--had waited until after the U.S. elections to hint that their consensus for a strong dollar was breaking down.
Among market highlights:
* Technology stocks helped lead the market higher. Intel rose 3 1/4 to 122 1/8. The company announced after trading closed Wednesday that it expects sales for the current quarter to far outpace those of the previous one. IBM rose 1/2 to 133 3/4, and Cisco Systems added 3 1/4 to 64 1/2.
Hewlett-Packard gained 2 3/4 to 48 1/8 after SoundView Financial raised its 1997 earnings estimates for the company. Read-Rite rose 2 13/16 to 22 11/16 after the maker of computer disk drive components reassured investors at a technology conference in New York that there is healthy demand for its products.
* Cablevision Systems fell 6 5/8 to 25 7/8, its lowest since 1992. The cable TV system operator said late Thursday that increases in operating expenses will hurt cash flow in the fourth quarter. It also said its third-quarter loss widened to $4.31 a share from $1.85 for the year-ago quarter.
* Lockheed Martin shares fell 5/8 to 89 3/4 after General Dynamics said it would buy two Lockheed units for $450 million. General Dynamics rose 1 1/4 to 68 1/2.
* Home improvement products retailer Lowe’s lost 4 to 39 1/2 on an earnings warning for the fourth quarter.
* Republic Industries rose 2 7/8 to 33 5/8 on news that it plans to acquire Alamo Rent A Car for $625 million.
* Fila Holdings surged 7 1/4 to 82 7/8 on sharply higher quarterly earnings for the apparel company
Overseas, Tokyo’s Nikkei-225 stock average fell 1%, Frankfurt’s DAX index fell 0.6%, and London’s FTSE-100 fell 0.9%.
Copper prices rose sharply amid speculation that the London Metal Exchange will announce another sharp cut in supplies today.
LME supplies have fallen 56% to 121,175 metric tons in the last two months as metal has been relocated from Europe to the Far East and the U.S.
“We still have mixed opinions how much copper is going to the Far East,” said Rich Hirsch of Deutsche Morgan Grenfell.
December copper on New York’s Commodity Exchange closed up 2.90 cents at 95.55 cents a pound.
“It’s all the fault of the Japanese, talking the dollar down and the yen back up, which created some nervousness in world financial markets and resulted in some fund short covering in commodities,” said Phil Tiger, commodities strategist for Smith Barney in Washington.
