Yields Fall but So Do Blue Chips
The streaking stock market finally took a breather Friday, ignoring another bond market rally to close mixed.
The Dow Jones industrial average slipped 33.48 points to 6,988.96, one day after topping the 7,000 mark for the first time. For the week, however, the index gained 133.16 points.
Activity in all major markets was more subdued, with the holiday weekend bearing down. Bond and currency markets closed early.
In the stock market, “We saw a little bit of profit taking. I don’t think there’s anything more to read into it,” said Phil Orlando, chief investment officer at Value Line Asset Management.
The Dow couldn’t draw any strength from another sharp drop in bond yields, after the government reported that wholesale prices fell 0.3% last month, the first decline since October 1994 and another strong sign that inflation is under control.
The news stunned economists and triggered a bond market rally that sent the yield on the bellwether 30-year Treasury bond tumbling to 6.53% from 6.62% on Thursday. The yield hasn’t been this low since Dec. 10.
While lower interest rates are generally good news for stocks, analysts noted that the stock market has already rallied spectacularly this year, perhaps largely anticipating rates’ decline.
In any case, most broad market indexes were off only modestly Friday. The Nasdaq composite, for example, slipped 3.62 points to 1,367.19. For the week it was up 0.7%, versus the Dow’s 2% rise.
Winners actually edged losers on the New York Stock Exchange on Friday, although losers had a slight edge on Nasdaq.
“There’s a tendency to take profits once the market reaches a plateau, and people are thinking, ‘Let me get this done today so I can have some peace this weekend,’ ” said Peggy Farley, chief executive at Amas Securities.
With the Dow already at or near year-end targets set by many Wall Street professionals, some strategists predicted stocks will have a tough time advancing further in the short run.
Among Friday’s highlights:
* In the Dow, profit takers hit Merck, which fell 2 1/4 to 97 3/8; Procter & Gamble, which lost 2 to 124 7/8; Caterpillar, which fell 3 3/8 to 79 3/4; and DuPont, which dropped 2 5/8 to 109 5/8.
But Disney rose 3/4 to 78 1/8 and traded briefly at a record 79 1/4 amid expectations of continued double-digit earnings growth.
* Technology stocks were also among the weaker issues. Intel lost 2 1/2 to 154 1/2, Microsoft fell 2 1/8 to 97 7/8 and IBM was off 1 3/8 to 145.
* Stocks of many major banks, however, retained their strength as bond yields continued to fall. Citicorp gained 2 3/4 to 126 1/4 and NationsBank was up 2 to 119 3/4.
* AMR, parent of American Airlines, fell 1 1/4 to 81 7/8 as a midnight deadline for a pilots strike loomed.
In currency trading, the dollar finished higher against most major currencies. In intraday trading, it reached a high of 124.80 Japanese yen, the strongest level since February 1993 and the first new four-year high against the yen in a week. It settled in New York at 124.22 yen, off from 124.35 on Thursday.
In foreign stock trading, Mexico City’s Bolsa rose to a record close after the peso surged to a 16-week high against the dollar and industrial activity rose in line with investor expectations.
The Bolsa rose 48.31 points, or 1.28%, to 3826.77 after the peso jumped 0.33% to 12.87 cents each, its highest level since Oct. 21.
A stronger peso makes Mexican stocks more valuable in dollar terms.
