Dow sets record despite reports of slower-than-forecast job growth

January 07, 1994|By Bloomberg Business News

NEW YORK -- The Dow Jones industrial average closed yesterday above the 3,800 level to set its second record in two days, as investors overlooked comments by Labor Secretary Robert Reich suggesting job growth in December was weaker (( than expected.

Mr. Reich said this morning's employment report probably would FTC show a gain of 160,000 to 200,000 nonfarm jobs, less than forecast. Economists surveyed by Bloomberg Business News expect the report to show a gain of 226,000 new jobs.

Stocks gained early in the day as Mr. Reich's comments helped depress yields on government bonds. Bond yields have risen about 20 basis points over the past eight sessions amid reports of faster growth in the economy. The belief that the recovery is intact prompted investors to buy chemicals, railroads, and auto stocks yesterday.

The Dow industrials climbed 5.06, to 3,803.88, breaking Wednesday's high of 3,798.82, to close above 3,800 for the first time ever. Trading yesterday was the 10th most active Big Board session in history, with about 367 million shares changing hands.

Standard & Poor's 500 Index dipped 0.43, to 467.12. Its closing high is 470.94, set Dec. 28. The Nasdaq Composite rose 2.37, to 780.42, buoyed by gains in Microsoft Corp. and Adobe Systems Inc.

Other averages also closed mixed, reflecting investors' preference for stocks that do best in an expanding economy over those that benefit from falling interest rates.

The Dow Jones transportation average surged 23.38, to a record 1,802.21, breaking Wednesday's 1,778.83. The rise was led by Union Pacific, up $1.75, at $66.375; Federal Express Corp., up $1.625, at $72.50; and CSX Corp., up $1.75, at $85.75. Earlier yesterday, the Association of American Railroads said freight carloads on major U.S. railroads increased 3.8 percent last week from a week earlier.

The Dow Jones utilities average closed off 2.83, to 221.20. Electric utilities were among the biggest decliners yesterday as concern persists that utility stocks would do poorly if interest rates continue to rise.

General Motors Corp. rose 25 cents, to $57.125; Chrysler Corp. closed up 50 cents, at $56.25; and Ford Motor Co. slipped 12.5 cents, to $63.625. Auto stocks also got a boost from positive Wall Street reaction to the industry's annual trade show in Detroit.

Dow Chemical Co. rallied $1.375, to $59.25; and Du Pont went up 50 cents, to $52.375. Those stocks rose after a Goldman, Sachs & Co. analyst, Avi Nash, raised his rating to "buy."

Advancing common stocks were about even with decliners on the New York Stock Exchange.

Meantime, interest rates declined on Mr. Reich's comments about December job growth. The yield on the benchmark 30-year Treasury bond dropped as low as 6.34 percent after Mr. Reich's remarks and the release of the Labor Department's report on weekly unemployment claims. The government said claims surged 70,000 last week, the biggest one-week gain since July 1992.

"It looks like the employment report is going to be worse than expected," said Don Hays, investment strategist at Wheat First Butcher & Singer. "That's encouraging news for the bond market. For stocks, it's not the best of news."

Retailers were active amid the release of December same-store sales, and revenue from stores open more than one year.

Dayton-Hudson rose $1, to $68.375; Kmart dropped $1.50, to $19.50; J.C. Penney lost $1, to $51.625; Gap gained $3.125, to $41.50; Hills Stores went up 75 cents, to $21.50; and AnnTaylor fell $1, to $24.875.

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