Stocks Mixed, Yields Fall on Inflation Data
Stocks closed mixed Friday as investors took profits in the high-flying blue chips and shifted to smaller companies, boosting the lagging Nasdaq market.
The Dow Jones industrial average fell 10.77 points to 6,813.09, trimming the week’s gain to 116.11 points and January’s surprising rally to 364.82 points, or about 5.7%.
The Nasdaq composite index rose 8.83 points to 1,379.85, ending up 16.01 points for the week.
In the broader market, advancing issues led decliners 1,380 to 1,098 on heavy volume of 574 million shares on the New York Stock Exchange.
“With a couple of good days behind us, it looks [like] some players are taking profits ahead of the weekend,” said Alan Ackerman, market strategist at Fahnestock & Co. “But it’s modest, and the market is giving back very little ground.”
A strong rally in bonds on new evidence that the economy is fighting off inflation boosted the blue chips earlier in the day, but they fell victim to late profit taking.
The good news on inflation came from a Commerce Department report showing the nation’s gross domestic product grew by an annual rate of 4.7% in the fourth quarter, more than double the third quarter’s 2.1% rate and well ahead of forecasts for 3.9% growth.
Despite the strength, the GDP price index rose only 1.8%, showing little if any inflation threat.
In the bond market, the price of the benchmark 30-year Treasury bond gained a full point, which lowered its yield to 6.78% from Thursday’s close of 6.87%.
“Investors have been watching the yield on the long bond very carefully because many see 7% as a level where stocks may give back ground,” Ackerman said.
“We did see a little profit taking at the end, but with yields a bit lower there’s a sense it’s best to stay the course,” he said.
Looking past the Dow’s marginal decline, the signs from the market were mostly positive.
Also important, according to market tradition, was that the Dow finished January about 360 points higher than it started the month. “As goes January, so goes the year,” said Kenneth Ducey, director of trading at BT Brokerage, reciting a Wall Street adage.
Advancing issues outnumbered decliners by more than a 5-4 margin on the New York Stock Exchange in heavy trading.
The Standard & Poor’s 500-stock list rose 1.99 points to 786.16, just 0.07 shy of a record high. The NYSE’s composite index rose 0.78 point to 411.98, less than a point from a record. The Nasdaq composite index rose 8.83 points to 1,379.85.
The Russell 2,000 index of small-cap companies rose 1.16 points to 369.45.
Among Friday’s highlights:
* The NYSE’s most active issue was Mercury Finance, which plunged 12 7/8, or 86.5%, to 2. After revealing earlier in the week that its books had been falsified, the Chicago-based auto lender defaulted on $17 million in commercial debt payments due Friday.
* The Dow’s biggest decliners included issues that had risen sharply earlier this week. General Electric fell 2 1/8 to 103 1/2 and Philip Morris dropped 1 to 118 7/8.
But Dow component J.P. Morgan rose 1 3/4 to 101 and American Express, also in the Dow, rose 3/8 to 62 1/8.
* Intel surged again in Nasdaq trading, rising 2 1/8 to 162 1/4, following Wednesday’s news that the chip maker won’t cut prices as much as expected.
Other technology issues fared well. Cisco Systems rose 2 1/4 to 69 3/4; Anadigics soared 7 3/4 to 53 1/4 on a strong earnings report.
* Takeover speculation boosted shares of Dow Jones, which rose 1 1/8 to 39 5/8 after a report in BusinessWeek that London-based Reuters Holdings, down 7/8 to 63 7/8, made overtures about buying it.
PaineWebber Group rose 4 5/8 to 36 amid speculation that it would be bought by a commercial bank or other financial institution.
Novell jumped 7/8 to 12 5/8 amid speculation that it would be bought.
* Falling yields helped banks. Chase Manhattan rose 3/4 to 92 1/2. Citicorp surged 2 1/8 to 116 3/8.
Overseas, Mexico City’s Bolsa index fell 25.75 points, or 0.7%, to 3,647.17. Tokyo’s Nikkei stock average rose 2.6%, Frankfurt’s DAX index rose 0.6%, and London’s FTSE-100 rose 1.1% to a new high.
