Stocks Mixed, Even as Bond Yields Slide
Wall Street took a breather on Monday, as stocks closed mixed despite another strong bond market rally.
Elsewhere, plunging commodity prices, led by gold, continued to suggest that inflation will remain under control.
For stocks the day was fairly dull: The Dow industrials closed off 37.32 points at 7,858.49 in light profit-taking among blue chips.
In the broad market, winners had a narrow edge over losers on the New York Stock Exchange, while losers had the edge on Nasdaq.
Blue-chip share prices had rocketed to record highs Thursday after the government’s report on June employment seemed to confirm that the economy has slowed.
That removes any pressure the Federal Reserve Board might have felt to tighten credit again in the near term.
The bond market, reopening after the holiday weekend, continued to rally on the employment report data.
Yields fell across the board, with the 30-year Treasury bond yield sliding to 6.57% from 6.62% on Thursday. The yield now is just slightly above the 1997 low of 6.52% set Feb. 14.
Bonds also got a boost from a BusinessWeek article that quoted a conservative scholar Judy Shelton as saying Fed Chairman Alan Greenspan is “open to the possibility that we have entered a new economic age” in which faster economic growth won’t necessarily quicken inflation.
Meanwhile, gold’s ongoing plunge appears to suggest that many investors see little point in holding the metal as a traditional inflation hedge anymore, if inflation remains at current low levels.
In New York futures trading, the July contract plummeted $6.10 to $318.10 an ounce, the lowest since December 1985. Silver prices also plunged. (Investor Spotlight, D14.)
Grain prices also remain in a downward spiral, as favorable Midwest growing conditions bolster prospects for bumper crops this fall.
As for Wall Street, analysts attributed Monday’s pullback to routine profit-taking, noting that many declining issues were among those that racked up big gains last week.
Few analysts thought the drop represented anything more than a brief interruption in the sizzling run that has left most, if not all, of Wall Street’s forecasts far behind.
“The bulls are definitely still in charge here,” said Greg Nie, technical analyst at Everen Securities Inc. “Any profit-taking here is likely to be reasonably contained and very short-term.”
Among Monday’s highlights:
* The Dow was pressured throughout the session by American Express, which fell $4.63 to $78.38. It had rocketed last week on fresh takeover rumors.
Also in the Dow, Walt Disney shares also continued to slide, falling $1.25 to $76.
* Alcoa, another Dow stock, rose $1.25 to $78.25 after the company reported better-than-expected quarterly earnings.
* Drug stocks were hit by profit-taking. Merck lost $1.69 to $103.50 and Pfizer dropped $1.75 to $62.
* Many major tech stocks bucked the blue-chip trend. Cisco Systems rose $2.31 to $73.88, Dell Computer gained $2.75 to $125.13 and Intel rose $2.44 to $147.38.
* Telecommunications stocks rose on a report that AT&T; is considering making a bid to acquire Southern New England Telecommunications, GTE or Teleport Communications Group. AT&T; rose 63 cents to $36.63, Southern New England rose 25 cents to $40.50, GTE gained 25 cents to $45.94 and Teleport Communications fell 25 cents to $33.75.
* Gold-mining stocks collapsed as bullion prices sank. Barrick Gold fell $1.69 to $20.25, Placer Dome tumbled $2.25 to $14 and Newmont Mining lost $2.44 to $35.44.
In currency trading, the dollar dipped below 112 Japanese yen before steadying in New York at 112.83 yen, compared with 113.80 on Thursday, on news of a wider Japanese trade surplus.
In foreign stock trading, Tokyo’s Nikkei stock average fell 1.3% to 19,705 as the dollar weakened.
But Frankfurt’s DAX index rose 0.8% to a record high of 3,972.
Stocks steadied in Hong Kong after the volatility that followed the Chinese takeover last week. The Hang Seng index added 0.2% to 14,858.
Meanwhile, the Bangkok market was hit by profit-taking after soaring last week in the wake of the government’s decision to devalue the currency.
Market Roundup, D12
