Blue Chips Send Dow Up 44; Yields Decline
Blue-chip stocks snapped a three-session slump, but the broad market struggled again Monday in hesitant trading before a widely anticipated inflation reading in the quarterly employment cost report.
The Dow Jones industrial average rose 44.15 points to 6,783.02 despite a sharp drop by Boeing, which took 22 points off the Dow after issuing disappointing profit numbers.
Like the Dow, which opened the session with a 36-point loss, most broad market indicators also turned positive after a weak start.
Most of the buying, however, focused on blue-chip and other large-company shares, underscoring the lack of conviction that has hindered the market’s recent efforts to rebound.
Analysts attributed most of the gains by popular indexes to technical forces, which had considerable sway on a day with notably light volume.
Interest-rate-sensitive stocks, which would suffer the most should inflation pick up, put in a strong performance, surprising some on Wall Street, coming as they did just ahead of an extremely heavy calendar of economic data.
“To some degree, people are placing their bets,” said Peter Green, vice president of technical research at Gruntal & Co., “and those bets are interest-rate sensitive.”
Meanwhile, U.S. bonds rose for the first time in four days after the Federal Reserve bought $1.924 billion of Treasury securities for its own account.
The Fed sometimes buys notes or bonds in what’s known as a “coupon pass” when it wants to permanently add reserves to the banking system. Monday’s purchases prompted traders to buy Treasuries as well, said Todd Speiser, a trader at Aubrey G. Lanston & Co.
As the price of the bellwether 30-year Treasury climbed, its yield was pushed down to 7.11% from Friday’s close of 7.13%.
Beyond the upturn in financial stocks, the broad market’s performance was cautious and mixed ahead of key economic data.
Advancing issues outnumbered decliners by an 11-to-9 margin in moderate trading on the New York Stock Exchange.
The NYSE composite index of all listed common stocks rose 3.31 to 403.69. The Nasdaq composite index rose 7.74 points to 1,217.03 and the Standard & Poor’s composite index of 500 stocks rose 7.59 points to 772.96.
After nearly two full weeks of uneasy calm on the economic front, this week’s calendar was filled with reports that should weigh heavily in the Federal Reserve Board’s deliberations on whether inflationary pressures are severe enough to merit another increase in interest rates.
There was little reaction to Monday’s news that sales of new homes slipped in March, but only modestly from February’s 11-year high. Instead, most investors were anxiously awaiting today’s first-quarter reading on employment costs, which constitute two-thirds of a product’s cost.
After employment, gross domestic product and manufacturing numbers are due later in the week. Analysts said the mood on the floor was likely to become even more cautious for the next few days.
“We still have a very full plate in front of us,” said Dick Stein, vice president at U.S. Clearing Corp. “This is a case where the other team has the ball and the rest of us play defense.”
Among Monday’s highlights:
* The Dow’s big winners were Procter & Gamble, up 3 1/8 to 124 5/8; American Express, up 3 to 64 1/8; and J.P. Morgan, up 2 1/4 to 98 1/8.
The Dow’s big loser was Boeing, falling 6 5/8 to 95 3/8 despite reporting strong first-quarter profit. But the results fell shy of some forecasts.
* Interest-rate-sensitive issues fared well, particularly banks. Wells Fargo gained 7 1/4 to 259 1/4; BankAmerica rose 3 1/8 to 110 1/2; Citicorp advanced 3 1/4 to 107 1/4; and Chase Manhattan added 2 3/8 to 87 3/4.
* Machine tool maker Giddings & Lewis jumped 6 17/64 to 20 23/64 after Harnischfeger Industries launched a $19-a-share tender offer. Harnischfeger fell 3 1/8 to 42 1/4.
* Nike fell 2 3/4 to 53 3/8 after its stock was downgraded, citing a weak U.S. market.
* McDermott International and its affiliate, J. Ray McDermott, both failed to open for trading. McDermott said both companies would report larger-than-expected fourth-quarter losses.
In currency trading, the dollar closed higher in New York on Monday, though off its best levels reached in Asian trading, as Group of Seven finance ministers left room for further dollar gains, currency dealers said.
The dollar climbed to a 37-month peak against the German mark and near its 55-month high against the Japanese yen after the outcome of Sunday’s meeting between G7 officials in Washington was more lenient than traders had anticipated.
The dollar stood at 1.7325 German marks in late New York trading, below its high of 1.7389 but above 1.7275 late in New York on Friday. The dollar rose to 126.98 yen, below its high for the day of 127.08, but above 126.25 at Friday’s close.
Overseas, Tokyo’s Nikkei stock average rose 0.3%, Frankfurt’s DAX index fell 0.4%, and London’s FTSE-100 rose 0.5%.
Market Roundup, D12
