U.S. Stocks Inch Up as Yields Hit New Low
Wall Street calmed down Friday after Thursday’s sharp drop, as most key indexes ended slightly higher--and gained for the week as well.
Meanwhile, long-term Treasury bond yields sank to new lows, nearing the 5% level that many investors a few years ago thought they wouldn’t see in their lifetimes.
In foreign trading stocks were mostly lower, although Tokyo shares bounced off their 12-year lows reached on Thursday.
On Wall Street the Dow Jones industrial average gained 21.89 points to 7,895.66 in a fairly uneventful session. Winners topped losers by 19 to 11 on the New York Stock Exchange.
Computerized program trading related to expiring options and futures contracts was heavy, but didn’t cause much volatility.
Despite falling 216 points on Thursday--partly in reaction to a fresh plunge in foreign markets--the Dow rose 100.16 points, or 1.3%, for the week.
The Nasdaq composite index, up 1.1% to 1,663.77 on Friday, rose 1.4% for the week.
Perhaps most significant, the battered Russell 2,000 index of smaller stocks jumped 2.2% on Friday and 2.7% for the week--suggesting that more investors were hunting among beaten-down smaller stocks.
The Russell still is down 26% from its record high, while the Dow is off 15.4%.
Overseas, European stocks fell again Friday after plunging on Thursday, on news that French telecom giant Alcatel’s earnings are being hurt by weaker sales to customers in Asia and Russia.
The French market, down 5.5% on Thursday, lost 1.7% on Friday. German stocks fell 1.5% after sliding 3.9% on Thursday.
In Tokyo, however, the Nikkei-225 index gained 0.9% on Friday after hitting a 12-year low Thursday on worries that strapped local governments will begin dumping real estate to raise cash.
Most Asian markets fell, with heavy losses in Singapore and the Philippines.
But Latin American markets rallied as Wall Street gained. Brazil’s market rose 4.3% and Mexico’s jumped 2.4%. For the week Latin markets were the world’s best, bouncing off two-year lows.
Although Wall Street has stabilized after its summer plunge, many analysts worry about the dimming outlook for corporate profits, with economies in Asia, Russia and Latin America in crisis.
“Earnings are far more at risk than people thought,” said Ted Bridges, with Omaha-based Bridges Investment Counsel
Those concerns swept some major U.S. multinationals this week, including Gillette, which warned of weaker foreign sales. The stock continued to slide on Friday, losing 31 cents to $36.56. It has plummeted 42% from its 1998 peak.
The same growth concerns that are hitting stocks are encouraging investors to buy Treasury bonds, on the assumption that inflation and interest rates may continue to decline. On Friday the bellwether 30-year T-bond yield sank to a record low 5.14% from 5.18% on Thursday. The yield was 5.42% as recently as Aug. 26.
“By the end of next year, the long bond yield will be a full percentage point lower,” predicted Thomas Carpenter, money manager at ASB Capital Management. “My guess is that we’ll see deflation,” as Asia’s economic slowdown spreads to the U.S., he said.
Still, key commodities have recently halted their summer declines. On Friday, crude oil futures jumped 63 cents to $15.49 a barrel--the first close above $15 in four months--amid signs that another large storm may disrupt Gulf of Mexico production.
Among Friday’s highlights:
* Financial stocks headed lower again. NationsBank fell $2.81 to $53.25, BankBoston lost $2.13 to $36.63 and Lehman Bros. sank $3.44 to $33.88.
* Union Carbide eased 13 cents to $37.31 after warning that its third-quarter profit will fall short of analysts’ estimates because of Asia’s economic crisis.
* Xylan plunged $2.38 to $10.75, extending a five-day slide, amid concern that third-quarter profit will be hurt by slowing sales. The Calabasas-based computer networking company gets about 20% of its revenue from sales to France’s Alcatel.
* On the plus side, winners included Ingram Micro, up $2.50 to $49; Amgen, up $1.63 to $73.25; AT&T;, up $1.69 to $59; and Philip Morris, up $1.69 to $46.25.
