Stocks Close Mixed Despite Fresh Slide in Bond Yields
The U.S. stock market looked tired on Monday after its recent surge, as prices finished mixed despite a strong bond market rally.
Elsewhere, the mighty dollar surged again, reaching its highest level against the German mark since the fall of the Berlin Wall.
On Wall Street the Dow Jones industrials eked out another record high, adding 7.67 points to 8,121.11. But the blue-chip index retreated from a midday peak of 8,178.
In the broad market winners and losers were nearly evenly matched on the New York Stock Exchange in modest trading. Most major indexes closed lower, with the Nasdaq composite losing 6.05 points to 1,563.53, leaving it 1% below its recent record high.
Stocks couldn’t catch fire even though long-term bond yields sank to their lowest level of the year amid reports that the Clinton administration and congressional leaders were close to sealing a balanced budget agreement after months of haggling. An announcement on a final agreement came after the markets closed.
A balanced-budget pact could ensure that government borrowing continues to decline in the years ahead, eliminating a potential source of upward pressure on interest rates. But this year, the strong economy is leaving the budget nearly in balance, in any case. (Story, D14.)
In the bond market Monday the yield on the 30-year Treasury bond sank to a seven-month low of 6.40% from 6.45% on Friday.
Bonds also were helped by expectations that the government’s report today on the second-quarter employment cost index, a key measure of compensation, will show that wage gains remain modest.
Other economic reports this week also may be key to determining whether bond yields go lower or back up in the near-term, analysts note. And because stocks have tracked the bond market closely since spring, bonds’ trend may also determine stocks’ trend.
Among Monday’s highlights:
* Profit-takers hit some high-flying blue-chip growth stocks. Some analysts said those stocks may be somewhat more vulnerable to selling by individual investors now that a capital-gains tax cut seems assured. (Story, D1.)
Among the day’s losers, Gillette dropped $3.56 to $98.06, Bristol-Myers sank $2.50 to $79.38, Merck fell $2.38 to $100.63 and Procter & Gamble lost $2.06 to $151.25.
* Personal computer shares continued to pull back after surging last week. Compaq fell $3.63 to $132, IBM dropped $2 to $105, Dell lost $2.63 to $78.78 and Gateway eased 69 cents to $39.81.
* The Dow’s advance was led by Alcoa, up $2 to $86.31, and GM, up $1.63 to $58.50 after Sunday’s resolution to a parts factory strike that had threatened to shut GM’s North American production.
Among GM’s main rivals, Chrysler rose 63 cents to $36.56 and Ford gained 88 cents to $41.44.
* Financial stocks benefited from falling bond yields. J.P. Morgan rose $1.44 to $110.75, Donaldson, Lufkin & Jenrette rose $2.06 to $66.63, KeyCorp rose $1.31 to $60.75 and First Union rose $1 to $99.06.
In currency trading, the dollar stood at 1.844 German marks after earlier hitting 1.849, its highest level since November 1989, when Germany was in turmoil as the Berlin Wall fell. The dollar had closed at 1.838 marks Friday.
The dollar also broke through 117 Japanese yen and stood at 117.87 yen late in New York, its highest level in 2 1/2 months, and up from 117.02 late on Friday.
The dollar has risen about 20% against the German mark this year on concerns that the planned single European currency would be weaker than expected and because of persistent weakness in the German economy.
The dollar’s rise against the German currency has accelerated recently as investors have gained confidence that the U.S. economy was growing steadily with little inflation.
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Market Roundup, D12
