Stocks End Mixed After Early Sell-Off
Signs of brisk holiday sales and manufacturing activity jostled the market’s tame inflation and interest rate outlook Monday, but stocks ended mixed as bargain hunters continued to devour every dip.
The Dow Jones industrial average finished unchanged at 6,521.70 points, having recovered from an early slide of nearly 49 points.
The technology-rich Nasdaq market rose to its sixth straight record high as computer-related shares rallied further, bolstered by hopes that those issues might be the leading beneficiaries of a strong holiday season.
Cash registers were extremely busy at the nation’s stores over the long Thanksgiving weekend, several leading retailers reported.
The news lifted retail shares. But most stock measures started the session weak with bonds amid worries--heightened by new reports showing increased manufacturing and construction activity--that rising consumer demand would aggravate lingering inflationary pressures in the economy. Higher inflation hurts bonds by making their fixed rate of return less valuable.
U.S. bonds were little changed, and yields hovered at nine-month lows, as traders fretted that a pickup in manufacturing and holiday spending may presage quicker economic growth next year.
Treasury bonds slumped after the National Assn. of Purchasing Management said its index of manufacturing rose to 52.7 in November from 50.2 in October, higher than the 50.4 reading economists expected and a signal that manufacturing is expanding at a faster pace.
As bond prices fell in the morning, the yield on the 30-year Treasury bond rose to nearly 6.40% from late Friday’s 6.35%, which was the lowest finish since early March. As bond prices rebounded in the afternoon, the yield settled down to 6.36%.
“Initially, we thought the [NAPM] numbers ought to have been bad” for bonds, said Lyle Fitterer, who manages $1.5 billion in bonds at Strong Capital Management in Milwaukee. “But continuing strength in the dollar” buoyed bonds by reinforcing expectations that investors outside the U.S. would keep buying Treasuries.
Investors initially used a weak bond market as incentive to secure some profits on the market’s record-setting rally last month. But, in what has become pattern, the early drop became a buying opportunity, trimming the day’s losses.
“The psychology is to buy every dip,” said Rao Chalasani, chief investment strategist at Everen Securities in Chicago.
Advancing issues outnumbered decliners by a narrow margin on the New York Stock Exchange.
The Standard & Poor’s 500-stock index fell 0.46 point to 756.56, and the NYSE’s composite index fell 0.29 point to 398.14.
The Nasdaq composite index moved within striking distance of 1,300 points for the first time, rising 7.21 to 1,299.82. The American Stock Exchange’s market value index rose 1.45 points to 592.93.
Among Monday’s highlights:
* A number of the nation’s big retailers saw gains. Sears rose 1 1/2 to 51 1/4 as one of the Dow’s strongest issues. Federated Department Stores jumped 1 5/8 to 35 3/4 and Kmart gained 3/8 to 11 3/8.
Saks Holdings rose 1/2 to 33 and Neiman Marcus Group gained 3/4 to 35 1/2.
Electronics retailer Best Buy rose 1 3/4 to 14 1/2.
* IBM set another nine-year high as the Dow’s strongest issue, rising 3 5/8 to 163 after the latest in a series of encouraging assessments by big investment firms, this time from Prudential Securities.
Among other tech issues, Digital Equipment jumped 3 1/2 to 40 1/8 and Hewlett-Packard rose 2 to 55 7/8.
Micron Technology was up 2 5/8 to 35 3/4, Iomega rose 2 3/8 to 25 and Western Digital added 4 3/4 to 58 1/2 after unveiling new products.
America Online rose 4 5/8 to 39 7/8 on expectations that the No. 1 computer online service signed up as many as 300,000 new subscribers in November, and cable firm Comcast gained 3/8 to 17.
Informix rose 2 5/8 to 26 3/8 after the developer of database management software unveiled new server software to better manage data.
* Rising bond yields sent many bank shares lower. BankAmerica fell 1 to 101 3/4, Chase Manhattan dropped 1 3/8 to 93 1/8 and J.P. Morgan fell 1 to 93 1/4.
* Quaker Oats fell 1 5/8 to 37 3/4 as speculation waned about the food and beverage company selling its Snapple division.
Overseas, Tokyo’s Nikkei stock average fell 1.6%, Frankfurt’s DAX index rose 0.5% and London’s FTSE-100 fell 0.5%.
