Dow Up 12 to Yet Another Record High : Market Overview

The Dow industrial average reached another all-time high on Monday, and the broader market also rose on indications that the economy may be picking up steam.

* Long-term Treasury bond yields jumped above 6% for the first time since Oct. 7, as bond investors reacted negatively to encouraging economic reports.

* Silver futures prices nose-dived on news of a new photographic film that is made without silver. Gold followed silver lower.

Stocks

After spending most of Monday languishing in negative or mixed territory, stocks moved higher late in the session, shaking off a rise in interest rates.

The Dow industrials rose 12.02 points to a record 3,692.61, eclipsing the previous high of 3,687.86 that was set Oct. 28.

Investors have been increasingly willing to cheer good economic news by bidding stocks up, even though a healthier economy also could mean higher interest rates.

Monday, the National Assn. of Purchasing Management said the nation’s manufacturing sector expanded last month for the first time since May. The group’s index rose to 53.8% from 49.7% in September. That was better than the 51.7% many economists had forecast.

In addition, the Commerce Department said construction spending rose 0.8% in September, the fifth straight monthly increase.

On Wall Street, shares of companies whose fortunes are closely tied to the economic cycles performed best. Among them are autos, paper, chemicals and heavy machinery. Companies in all those sectors should post higher earnings as the economy grows.

Smaller stocks also gained. The Nasdaq composite index rose 4.51 points to 783.77.

Traders noted that overall activity was relatively muted. Big Board volume was 256 million shares, and advancing issues outnumbered declining ones by only about 10 to 9.

Among the market highlights:

* Industrial issues leading the market higher included Allied Signal, up 1 to 72 5/8; International Paper, up 2 1/4 to 61 3/4; Caterpillar, up 3/4 to 92 1/4; PPG Industries, up 1 1/2 to 71 1/4, and Cooper Industries, up 1 3/8 to 53 5/8.

* Transportation stocks also advanced, and the Dow transports index jumped 15.17 points to a record 1,742.24. Railroad CSX jumped 1 1/2 to 82 1/2; trucker Roadway gained 1 1/2 to 61 1/2; United Airlines’ parent, UAL, rose 2 to 154.

* Technology stocks rallied, led by IBM, up 1 3/4 to 47 3/4. Other gainers included Compaq, up 1 3/8 to 68 7/8, and Computer Sciences, up 2 7/8 to 94 3/4.

* Defense stocks also rallied, led by McDonnell Douglas, which gained 4 3/8 to 98 1/8 after announcing strong earnings.

* On the downside, Kodak fell 1 1/8 to 61 3/4 on the news that Xerox has developed a silver-less film for graphics arts use. Xerox rose 3/4 to 80.

The Xerox development also sent silver and gold prices lower, thus weakening some precious metals stocks. Placer Dome lost 3/8 to 24; Homestake Mining eased 3/8 to 18 7/8; American Barrick slid 1 1/8 to 26.

Stocks were mostly lower abroad. In Japan, the Nikkei average ended 264.73 points lower at 19,438.24.

In Frankfurt, the DAX index lost 6.88 points to end at 2,062.12. London’s FTSE-100 index shed 6.6 points to close at 3,164.4.

In Mexico, the market is closed for a holiday until Wednesday.

Other Markets

The rise in bond yields, the sixth in eight sessions, defied the sharp drops in precious metals prices, a trend that usually spurs bond buying.

The bullish economic reports pushed the Treasury’s 30-year bond yield to 6.03% from 5.96% on Friday. Shorter-term yields also rose.

In the past month, a string of reports suggesting economic strength--and potentially higher inflation--have spooked investors, who fear that bond yields may finally have bottomed.

Monday’s report of expansion in the manufacturing sector and the Commerce Department’s construction spending report added to investors’ nervousness.

In other markets:

* Silver for December delivery tumbled 14.2 cents on the New York Comex to $4.23 an ounce, its lowest price since Oct. 5. Gold followed silver, sinking $7.50 to $362.10 an ounce.

Xerox said its new VerdeFilm, which will be marketed first to professional photographers, produces images as clear as those made on conventional film but is developed with heat rather than chemicals. Conventional photo film accounts for about 30% of silver consumption.

* On the New York Merc, light, sweet crude oil for December delivery rebounded from a recent dive and climbed 50 cents to $17.42 a barrel. Friday’s reports of gross overproduction by OPEC members were revised downward, which helped the market’s tone.

Market Roundup, D8