Stocks rise slightly as bonds recover

June 02, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks eked out small gains yesterday as a bond market recovery and a semiconductor rally offset concern over inflation.

"The stock market's been keying in on one thing -- the bond market," said Lance Zipper, head of Nasdaq trading at Kidder, Peabody & Co. "When the bond market moved to the plus side by the end of the day, stocks just followed along."

Stocks opened lower after the National Association of Purchasing Management's May index on manufacturing surpassed expectations, raising the possibility a strong economy will fuel inflation and higher interest rates.

That concern was underscored by a surge in the index's price component for raw materials. The NAPM report sent the yield on the Treasury's benchmark 30-year bond as high as 7.51 percent, up 8 basis points from late Tuesday.

Stocks recouped their losses in the early afternoon, as slipping commodity prices triggered a recovery in bonds. The Commodity Research Bureau index, another inflation barometer, fell 1.61, to 233.8, driving the 30-year bond yield back down to 7.38 percent, traders said.

The Dow Jones industrial average closed up 2.46, at 3,760.83, after falling as much as 26.15 points. The Standard & Poor's 500 index rose 1.12, to 457.63, after dropping as much as 2.52 points. The Nasdaq composite index closed up 0.33, at 735.52, after shedding as much as 4.62 points.

Semiconductor shares were the biggest gainer in the S&P 500 and the Nasdaq composite. Semiconductor and chip-making equipment manufacturers' stocks climbed after a Prudential Securities Inc. analyst, Mark Edelstone, boosted his earnings estimate for Advanced Micro Devices Inc., a leading chip maker.

In addition, Xilinx Inc., a maker of specialty semiconductors, was raised to "strong buy" from "neutral" at Kidder, Peabody & Co. The stock jumped $5.75, to $46.75.

Advanced Micro Devices advanced $1.875, to $28.875; Intel Corp. rallied $2.1094, to $64.6094; Texas Instruments Inc. jumped $4.375, to $84.625; and Motorola Inc. rose $1.625, to $48.375. Applied Materials Inc. soared $3.25, to $46.875.

Among other market indexes, the Russell 2000 index rose 0.80, to 250.08, and the American Stock Exchange market value index fell 0.57, to 439.88.

Eleven stocks climbed for every nine that fell on the New York Stock Exchange. Trading was moderate, with about 280 million shares changing hands on the Big Board. Many people are awaiting tomorrow's employment report for May before laying bets on the direction of stock prices and interest rates, traders said. The monthly employment report is considered one of the most comprehensive pictures of the economy's overall health.

Given yesterday's mixed signals on inflation, "there's no real direction" for stock investors, said Kenneth Ducey, head trader at BT Brokerage.

IDB Communications Group Inc., the most actively traded stock, sank $7.375, to $7.125, as more than 32.8 million shares traded. The provider of satellite communications said its auditors, Deloitte & Touche, resigned amid a dispute over the reporting of first-quarter revenue.

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