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Dow Again Sets Record After Volatile Session

Markets: A day of wild swings in stocks and bonds leaves the blue-chip index at 5,630.49, while bond yields jump.

February 24, 1996|From Times Staff and Wire Reports

The Dow Jones industrial average snatched another victory from the jaws of defeat on Friday, gaining 22.03 points to a record 5,630.49 despite a fresh rise in interest rates.

But the broad market was mixed, capping a frenetic week amid indications that market volatility is increasing sharply.

After Thursday's surprise 92.49-point surge in the Dow, the market roared ahead at the opening Friday, with the Dow up more than 50 points.

The gain coincided with an early slide in bond yields, after the government reported that fourth-quarter economic growth was a weaker-than-expected 0.9%. The news seemed to boost chances for more interest-rate cuts by the Federal Reserve Board.

But bond investors, who have grown increasingly nervous in recent weeks that the economy is stronger than it looks, began dumping bonds again at midday on news that January housing starts rose a surprisingly strong 4.4%.

The 30-year Treasury bond yield, which closed at 6.33% on Thursday, fell to 6.30% at midday Friday, then rebounded to 6.40% by the close--tying Wednesday's four-month high. As recently as Feb. 13, the yield was 6.03%.

Shorter-term bond yields also rose Friday as traders described fading hopes for significant new Fed rate cuts.

"By the middle of this year we'll get another rebound" in economic growth, said Kirk Mentzer, who manages $400 million of bond funds at Star Bank in Cincinnati. "We've been going along with the assumption that we'll have a recession."

Bonds also were buffeted by concern that more investors will begin selling bonds in favor of stocks. Speculation that mutual fund managers at Fidelity Investments were dumping bonds helped push yields up, traders said. Fidelity declined to comment.

"The stories have been circulating all morning about Fidelity moving out of fixed income and back into stocks," said Michael Marzano, a bond futures trader for Fimat Futures USA in Chicago.

That jibed with Wall Street's performance Friday: Although the Dow fell more than 50 points at midday as yields rose, the market fought back by the close.

Many key stock indexes other than the Dow also closed up for the day. The Nasdaq composite index of mostly smaller stocks added 0.68 point to a record 1,117.79.

However, declining issues still topped winners 1,285 to 1,115 on the Big Board, although winners had the edge on Nasdaq.

Analysts said that while stocks' resilience is impressive, the market's widening intra-day swings are a sign of rising speculative activity and could herald trouble. "The volatility has become extremely intense," said James Solloway, analyst at Argus Corp.

Among Friday's highlights:

* The Dow managed to pull ahead thanks to gains in Alcoa, up 1 3/4 to 58; IBM, up 1 1/2 to 125 5/8; and Sears, up 2 5/8 to 47 7/8.

* AMR, parent of American Airlines, surged 1 7/8 to 89 1/2 after Salomon Bros. analyst Julius Maldutis urged clients to buy the stock on grounds that AMR is likely to sell part of its SABRE computer reservations unit this year. AMR declined comment.

* Oil stocks were weak as crude prices fell on renewed expectations that Iraq will be allowed to sell oil again soon. Mobil fell 2 1/4 to 114, Texaco dropped 1 1/4 to 81 5/8 and Exxon was off 1 1/4 to 82 1/4.

Market Roundup, D4

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