Surge in stocks checked by T-bonds' weakness

WALL STREET

October 21, 1992|By Bloomberg Business News

NEW YORK -- Some robust corporate earnings and signs that the Bundesbank might cut interest rates soon gave U.S. stocks a boost yesterday.

While the Dow Jones industrial average closed 2.43 points lower at 3186.02, advancing common stocks outnumbered declining issues by about 3-to-2 on the New York Stock Exchange. Trading was active, with about 261 million shares changing hands on the Big Board.

Standard & Poor's 500 climbed 0.49, to 415.47, and the NYSE Composite gained 0.34, to 228.58, while the NASDAQ Combined Composite rose 2.03, to 592.70. The Dow Jones transportation average rallied 12.29 to 1296.51.

Stocks were held back by concerns about a 1-point drop in the 30-year Treasury bond. The long bond's yield rose 9 basis points, to 7.65 percent.

"The bond market eroded and that held back the stock market," said Thomas Callahan, senior vice president in U.S. equities at Yamaichi International (America).

The decline in Treasury bonds was caused by fears that Democratic presidential candidate Bill Clinton, who holds a big lead in the polls following the third and final presidential debate, will boost the budget deficit, analysts said.

"A Clinton victory is starting to spook people," said Tom Heck, senior vice president at Mabon Securities.

U.S. stocks received a boost from positive earnings surprises from such leading companies as Chrysler Corp., Compaq Computer Corp. and Johnson & Johnson. Speculation that the Bundesbank was set to cut interest rates also helped stocks.

The speculation resurfaced in Europe yesterday when the Bundesbank showed a willingness to lower overnight rates in open-market operations from the current 8.9 percent.

Stock markets in Europe rallied on the news, with Britain's FT-SE 100 rising 2.1 percent, or 54.8 points, and France's CAC 40 gaining 3.1 percent, or 52.2 points.

The stock market was little affected by the release of some positive economic news, traders said. The Commerce Department said housing starts rose 1.4 percent in September,

to an annual rate of 1.256 million. Economists were estimating that housing starts were down 3.2 percent last month.

Chrysler, Reebok International Ltd., Quantum Corp., Philip Morris Cos. and Merck & Co. were the five most actively traded issues on the U.S. Composite.

Chrysler jumped 5/8 , to 25 1/2 , after the release of better-than-expected third-quarter earnings. Driven by sales of Jeeps and minivans, more market share in North America, and fewer rebates, Chrysler reported third-quarter net income of $202 million, or 62 cents a share, improving upon a net loss of $82 million, or 36 cents a share, a year ago.

The rise in Chrysler shares spilled over to General Motors and Ford Motor. General Motors gained 5/8 , to 29 3/4 , and Ford rose 1 1/4 , to 38 1/8 .

Reebok tumbled 1 1/2 , to 27 1/8 , on disappointing third-quarter results and the company's warning that results would remain soft through the end of the year.

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