Blue Chips Rebound; Bond Yields Ease : Market Overview

Blue-chip stocks ended sharply higher as buyers were lured back to the market after five straight sessions of losses. The Dow Jones industrial average rose 25.74 points to end at 3,475.67.

* Soybeans and gold continued to climb, with the metal closing at its highest level since the 1991 Gulf War. Energy prices fell back.

* Treasury bond yields eased slightly as the market took a breather from inflation jitters.

Stocks

The fear of inflation subsided somewhat from Tuesday, while buying among depressed stocks gave the market a boost after two days of heavy selling.

The broader market did not advance as firmly. Gaining issues outnumbered declining ones by a slim 10-9 margin on the New York Stock Exchange. The NASDAQ composite index fell 3.43 to 698.79.

Investors breathed a sigh of relief as a widely watched index of commodity prices eased slightly after having risen sharply a day earlier.

The Dow Jones index lost more than 34 points Tuesday after the Commodity Research Bureau price index, considered a gauge of inflation, soared to a 21-month high. The CRB on Wednesday closed 0.07 of a point lower at 217.23.

“It was the one day in which the CRB was slightly lower, and so stocks rebounded pretty quickly,” said Gerald Simmons, head of institutional trading at Interstate/Johnson Lane.

Analysts said the market was still on shaky ground, and they noted weakness in technology and transportation shares.

Among the market highlights:

Gold issues were again prominent on active trading lists. Sunshine Mining ended unchanged at 3 1/2; American Barrick Resources fell 1/8 to 26 3/8.

Shares of Microsoft dropped 2 5/8 to 83 3/8 after Goldman, Sachs reduced its estimate of earnings on the computer company. A handful of other technology shares were also weaker. Oracle Systems fell 1 1/4 to 47 7/8; Apple Computer dropped 1 1/4 to 36 1/2; Intel eased 5/8 to 52 5/8.

IBM fell 1/4 to 46 5/8 after it was reported that the company’s chairman, Louis Gerstner, had decided against a shake-up of the sales force.

Hewlett-Packard recovered slightly from a 5-point drop a day earlier. It rose 1 3/4 to 77 1/4 on the NYSE.

The Dow Jones transportation average tumbled 28.99, or 1.90%, led by airline and air freight issues. Airlines fell on fare wars, viewed as a threat to company profits. UAL fell 1 to 124 3/8; AMR sank 1 1/2 to 59 5/8; Delta descended 3/4 to 46 3/8.

Overseas, London’s Financial Times 100-share index closed up 0.2 points at 2,848.3, while Frankfurt’s DAX 30-share index rose 18.89 points to 1,719.76, surpassing the year’s high of 1,718.21.

Tokyo’s Nikkei average of 225 stocks fell 109.11 points, or 0.55%, to 19,720.67.

Spurred by lower interest rates and a decline in the inflation rate, Mexico City’s 37-share IPC rose 13.39 points to 1,657.56.

Commodities

Gold futures continued their recent rally, attributed to inflation anxiety.

But crude oil and gasoline prices tumbled on the New York Mercantile Exchange in reaction to news of the possibility that the United Nations might allow Iraq to sell oil on an already oversupplied world market.

Soybean prices charged higher as rains in the Midwest continued to deter planting and damage crops. Soybean contract highs were reached in all months, with prices at their highest level in four years.

The November soybeans contract, which reflects the price at harvest, rose 17 1/4 cents to $7.15 a bushel. The last time soybean prices exceeded $7 was in July, 1989.

The possibility that rising farm prices would boost inflation lifted gold once again. Gold for August delivery on New York’s Commodity Exchange rallied $4.90 an ounce to $398.00 an ounce, eclipsing a former life-of-contract high of $395.50.

Actively traded crude oil for October slipped 22 cents to $18.54 a barrel. September gasoline fell 0.74 cent to 52.79 cents a gallon; October heating oil declined 0.53 cent to 52.75 cents a gallon.

Other Markets

Long-term bond yields fell slightly but short-term securities posted modest yield increases amid worries raised by this week’s meeting of the Federal Reserve Board’s policy-making arm.

The yield on the Treasury’s main 30-year bond eased to 6.67% from 6.68% on Tuesday. The bond’s price, which rises when yields fall, rose 1/32 point, or 31 cents per $1,000 in face value.

However, weakness among shorter-term maturities indicated some concern that the Fed’s Federal Open Market Committee, which met in secret Tuesday and Wednesday to set monetary policy, will decide to maintain its reputed bias toward higher interest rates as a way of containing inflation.

Yields on three-month Treasury bills rose to 3.09% as the discount rose 0.02 percentage point to 3.03%. Six-month yields rose to 3.19% as the discount advanced 0.01 point to 3.11%. One-year yields were unchanged at 3.41% as the discount rate held at 3.29%. Yields are the interest that bonds pay by maturity; the discount is the interest at which they are sold.

The dollar eased against the yen after a senior Japanese government official said that country’s exporters could tolerate more gains in the yen. The dollar was quoted at 107.80 yen in New York late in the day, down from 108.85 yen Tuesday.

The dollar was quoted at 1.7090 German marks in late New York trading, up from 1.7040 marks late Tuesday.

Market Roundup, D10