FINANCIAL MARKETS : Blue-Chip Run Halted; Yields at 5-Week High

Market Overview

* Treasury bond yields soared to five-week highs Thursday, touched off by reports of surprising strength in housing and employment.

* Blue-chip stocks halted their three-session record run, dragged down by rising bond yields and a bout of year-end profit taking. But broader market indicators were mixed.

* The dollar soared thanks to strong U.S. economic reports.

Credit

Bond yields rose for the fourth day in a row. However, the end-of-year selloff has been exaggerated by extremely thin holiday volume, which tends to give the few trades a disproportionate impact on the overall market.

The yield of the Treasury’s main 30-year bond jumped to 6.34% from 6.24% late Wednesday. Its price, which moves in the opposite direction, plunged 1 9/32 points, or $12.81 per $1,000 in face value.

It was the long bond’s highest yield since hitting 6.38% on Nov. 22. Throughout the fourth quarter, the bond market has been hammered by numerous signs of economic recovery, including rebounding automobile sales and buoyant consumer confidence.

In the latest data, the Labor Department reported that applications for unemployment benefits dropped 39,000 to a near five-year low last week. In addition, the departments of Commerce and Housing and Urban Development said new home sales rose 11.3% in November to the highest rate in more than seven years.

Stocks

The bond market tumble depressed stocks, as the Dow Jones industrials shed 18.45 points, closing at 3,775.88, ending three-straight days of record closes for that blue-chip average.

Broader measures of market performance were mixed. The Standard & Poor’s 500 index dipped 1.94 to 468.64, but the Nasdaq composite index of mostly smaller stocks gained 2.60 points to close at 771.08. Analysts said the over-the-counter market was anticipating its tradition of outperforming the Big Board in the month of January.

Losers beat gainers by a 10-9 margin on New York Stock Exchange volume of 193.6 million shares, down from 269.3 million Wednesday.

Activity was expected to be subdued again today, the last trading day of the year. Many major market participants already have made their final moves for 1993 and have withdrawn from Wall Street for the New Year’s holiday.

Among the market highlights:

* MCI Communications gained 1 1/2 to 27 after a report in the Wall Street Journal said the company soon plans to announce a big push into the local telephone market. The news had the opposite effect on the stocks of Baby Bell companies. Pacific Telesis eased 1/8 to 55 1/8, BellSouth fell 1 1/2 to 58 1/4, Southwestern Bell dropped 7/8 to 42 3/4 and U.S. West slipped 3/8 to 46 3/8. American Telephone & Telegraph, meanwhile, tumbled 5/8 to 52 5/8.

* Genentech jumped 1 1/8 to 49 1/2 after the Food and Drug Administration said it was licensing the biotech company’s drug Pulmozyme for the treatment of cystic fibrosis.

* Some single-country funds rebounded from losses Wednesday. Korea Fund closed up 7/8 at 23 1/2, while Taiwan Fund added 1 5/8 at 37 7/8.

* Primerica lost 7/8 to 38 as the merger between Primerica and Travelers was set to close today. The new company’s name will be Travelers.

Overseas, some Pacific Rim markets rocketed. Hong Kong stocks surged to another record close on a massive wave of foreign buying, with the Hang Seng index surging 427.70 points, or 3.74%, to finish at 11,877.47. Taiwan’s benchmark stock index rocketed 4.97% to 5813.55, a two-and-a-half-year high. Sydney’s All Ordinaries index rose 1.3% to hit a six-year high of 2,154.50.

Tokyo stocks ended that market’s last trading day of 1993 moderately firmer, with the Nikkei average gaining 145.21 points to close at 17,417.24.

In London, the Financial Times 100-share index finished down 33.2 points to 3,428.8 after setting a record high Wednesday.

Other Markets

The dollar soared as the strong U.S. economic reports brightened prospects for growth and pushed up bond yields.

In New York, the dollar rose to 1.7358 German marks from 1.7280 marks late Wednesday, and to 111.91 yen from 111.80 late Wednesday.

Lumber prices soared to near all-time highs Thursday, fueled by a booming housing market and a decline in available timber supplies. January lumber jumped the daily limit of $10 per 1,000 board feet to $478.80 per 1,000 board feet at the Chicago Mercantile Exchange.

In other commodity markets, oil prices eased to near the five-year low, and a slight gain in gold put the precious metal at the highest level in five months.

February delivery of light-sweet crude oil settled at $14.17 per barrel, down 27 cents, at the New York Mercantile Exchange. The New York commodities markets are closed today.

Gold bullion rose 10 cents to $391.90 an ounce for the most active February contract on New York’s Commodity Exchange.

Market Roundup, D5