Blue-chip stocks finished narrowly higher Friday in another session dominated by the outlook for interest rates.
The Dow Jones industrial average rose 32.91 points, to close at 7169.53, the fourth gain this week.
In the news background, the dollar suffered the worst drop against the yen in more than 18 months in a selloff on worries that the U.S. currency’s long-term rebound from its postwar lows two years ago finally is over.
Evidence of rising interest rates in Japan, speculation of no further rate increases in the United States and a warning from Japan’s finance minister that the dollar’s level remains too high all contributed to the decline.
The impetus for stocks’ rise was further improvement in bond yields, after Treasury investors started out the session celebrating what they initially considered to be encouraging remarks out of Federal Reserve Chairman Alan Greenspan.
In a speech Thursday night in New York, the Fed chairman said he saw no outbreak of inflation in the economy, and hinted that he expected data to show that the economy’s expansion would slow.
The remarks were considered less hawkish than some of his previous comments and, as the May 20 Federal Open Market Committee meeting approaches, investors initially thought they had reason to celebrate. Stocks opened higher, and the rally of this week’s early sessions seemed back on course.
Then came the doubts. Greenspan had, after all, in his speech vigorously defended the Fed’s controversial decision to raise rates in March. And he pledged to remain vigilant with regard to the inflation threat. Was he as dovish as investors initially believed?
Uncertain, investors quickly dissipated the intraday gains. Market averages fell, moving decisively back into positive territory only in the last hour of the trading session.
Shares of IBM, which rose to their highest level in more than three months Thursday, ended Friday up just 12 cents, at $167.50. Cisco Systems, 3Com and Cascade Communications–three networking stocks that soared for the week–were nearly unchanged Friday.
Among stocks of Chicago-area companies, shares of Illinois Tool Works rose 75 cents, to $95. The Glenview-based manufacturer boosted its quarterly dividend 26 percent, to 24 cents per share from 19, payable after taking into account a 2-for-1 stock split later this month.
Shares of ServiceMaster LP rose 12 cents, to $31.75. The Downers Grove-based network of service companies declared a 3-for-2 stock split and a cash distribution of 12 cents a share on a post-split basis.
The split is effective June 25 for shareholders of record on June 11. The distribution will be payable July 31 for shareholders of record on July 18.
