FINANCIAL MARKETS : Airline Issues Lift Market Doldrums

Market Overview

Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:

* The stock market ended higher, buoyed by a late rally in airline shares that offset a continuing selloff in consumer-brand stocks.

* Bond yields declined modestly as speculation mounted that the Treasury will sell fewer long-term bonds at its May auction.

Stocks

The market ended near the day’s high after trading for most of the period in a tight range.

Airline stocks sparked the turnaround, as reports of higher travel in March set off a stampede of buying. By the close, the Dow transport index was up 36.67 points, or 2.3%, to 1,617.82, a new record.

The Dow industrials, pulled up by the transport index, closed with a gain of 19.45 points to 3,397.02. On the Big Board, winners topped losers by about 5 to 4 as volume totaled a heavy 300 million shares.

The transport rally was significant because investors tend to look to those stocks for an indication that the economy is improving.

Still, many analysts are wary of the market’s next move, given the dramatic breakdown of consumer-brand stocks. Those stocks have been slumping on fears that slow consumer spending will spark widespread discounting.

Among the market highlights:

* Airline shares leading the group’s advance included American Airlines parent AMR, up 3 1/4 to 69; United parent UAL, up 9 7/8 to 137; Delta, up 3 1/2 to 57; USAir, up 3 1/8 to 24 1/4, and Southwest Airlines, which leaped 2 3/4 to 38 7/8.

* Auto issues rallied along with the airlines on optimism about the economy. GM added 7/8 to 39 1/4, Ford rose 5/8 to 54 5/8, and Chrysler gained 1/2 to 41 1/2.

Other industrial winners included Goodyear, up 1 5/8 to 75 3/8; Allied-Signal, up 1 3/8 to 64 5/8; Emerson Electric, up 1 3/8 to 61, and USX-U.S. Steel, up 1 1/2 to 39 1/4.

Tech stocks also rebounded, led by Compaq, up 3 1/2 to 50 1/4; Adobe, up 2 5/8 to 40 3/8; BMC Software, up 4 1/2 to 45 3/4, and Sybase, 2 3/4 to 54.

* Copper fell to a five-year low on falling demand. Copper miner Phelps Dodge plunged 2 5/8 to 44, and Cyprus Minerals tumbled 2 3/4 to 27 1/8.

* Consumer-brand stocks generally continued to fall--for a third day--on discounting worries. Food giant ConAgra led the decline, plummeting 2 3/4 to 23 after it warned of flat earnings this quarter because of higher meat costs.

Also, Campbell Soup fell 2 3/8 to 39 3/8, Gerber lost 1 1/4 to 28 3/8, Kellogg dropped 1 to 57, Coca-Cola eased 1/2 to 39 1/2, and Philip Morris (which initiated the latest selloff last Friday) lost 7/8 to 47 1/4.

* Among retailers, Wal-Mart was unchanged at 27 3/4 after sliding 2 on Tuesday, while Home Depot rebounded 2 3/8 to 58 after dropping 3 5/8 on Tuesday. But Limited provided new worries, dropping 1 to 22 3/4 on news that five executives have left its troubled flagship Limited Stores division.

* U. S. Surgical is likely to plummet today. After the market closed, the surgical device maker forecast a big drop in sales because of customer inventory changes. The stock lost 2 to 46 5/8, but in after-hours trading it was at 35.

Overseas, Tokyo’s rally resumed, pushing the Nikkei index above 20,000 before closing 342.43 points higher at 19,829.23.

In Frankfurt, the DAX index fell 15.09 points to 1,650.31. In London, the FTSE-100 index slipped 10.1 points to 2,822.1.

Credit

Long-term bond yields eased further, after Tuesday’s drop, as Goldman Sachs & Co. issued a report saying the Treasury will probably switch to semiannual bond auctions from quarterly ones.

A similar report by Stone & McCarthy Research on Tuesday had sparked a bond rally.

As part of the change in auctions, many analysts believe that the Treasury will also reduce issuance of 30-year bonds, thus making them more scarce.

That helped push the 30-year bond yield down to 6.94% on Wednesday from Tuesday’s 6.96%. The yield had jumped to 7.06% last Friday on rising inflation fears, but those worries have taken a back seat this week.

However, trading was quiet Wednesday, and a new inflation report is due today: the producer-price index for March.

Other Markets

The dollar rose against the mark on speculation that Germany will cut interest rates again, following cuts by Holland and Belgium.

But the dollar resumed its two-month drop against the yen despite rumors that the Bank of Japan was keeping a sharp eye on the pace of its currency’s appreciation.

The mark’s decline was mostly traced to further speculation that Germany is preparing to cut interest rates after more gloomy economic news this week.

The dollar closed at 1.619 marks in New York, up from 1.611 on Tuesday.

But it fell to 113.50 yen, down from late Tuesday’s 113.85 yen and a new postwar low.

Elsewhere, gold edged higher on New York’s Comex, up 50 cents to $338.40 for near-term futures. Silver rose 1.4 cents to $3.86.

On the New York Merc, light, sweet crude oil rose 7 cents to $20.37 a barrel.

Market Roundup, D8