Stocks Set New Highs; Bond Yields Edge Lower
Stocks rolled to another record Tuesday, while a rally in the bond market drove interest rates to their lowest levels in nearly eight months.
The dollar climbed to a 2 1/2-month high against the Japanese yen, but pulled back slightly against the German mark.
The Dow Jones industrial average rose 53.42 points to 8,174.53, the second consecutive record for the blue-chip average and the fifth in the last six sessions.
Broader stock measures also set new highs, overcoming a wary response to some market-friendly data released Tuesday.
Interest-rate-sensitive stocks paced the rally, with banks and other financial companies and those dependent on economic cycles posting the strongest advances.
Investors got a double dose of good news to start the session--the bipartisan deal reached late Monday to balance the federal budget and a government report Tuesday showing that labor costs rose 0.8% in the second quarter, in line with private economists’ forecasts.
Bond market investors especially liked the reports because they pointed to low inflation.
The price of the 30-year Treasury bond rose a quarter point; its yield fell to 6.38% from 6.4% Monday. It was the lowest yield on the benchmark bond since Dec. 3.
Investors face some major economic reports this week, including the first reading of the economy’s second-quarter performance, due Thursday, and the monthly jobs report for July, due Friday.
Advancing issues outnumbered decliners by a 3-2 margin on the New York Stock Exchange in heavy trading.
The Standard & Poor’s 500-stock list rose 5.84 points to 942.29, the NYSE composite index rose 2.50 points to 488.43, and the American Stock Exchange composite index rose 0.85 point to 640.20, setting new closing highs for all three measures. The Nasdaq composite index rose 8.79 points to 1,572.32 as computer-related shares showed some renewed life.
Among Tuesday’s highlights:
* Financial services stocks rose as bond yields fell. American Express rose $3.56 to $82.44 and Citicorp rose $5.88 to $130.56.
Other bank gainers included Chase Manhattan, up $2.63 to $108.88; First Chicago NBD, up $1.81 to $69.88; and NationsBank, up $1.75 to a record $69.63.
* Nasdaq’s rise buoyed Ascend Communications, up $6.38 to $53.13; Microsoft, up $2.94 to $139.94; and Dell Computer, up $2 to $80.88. Semiconductor maker Cyrix rose $1.88 to $24.94 after the company agreed to be acquired late Monday by National Semiconductor for $550 million in stock. National Semiconductor fell $2 to $31.
In currency markets, the dollar settled at 118.43 Japanese yen in New York, its highest close since May 13 and up from 117.60 yen on Monday. It ended at 1.8365 German marks, down from 1.8440 marks on Monday, when it touched its highest level since November 1989.
