Dow Adds 8.62 Despite Selloff in Banking, Oil
Wall Street stocks advanced modestly Tuesday, led by technology and transportation issues, but the market failed to extend Monday’s big rally because of sharp declines in the banking and oil sectors.
The Dow Jones industrial average finished up 8.62 points at 1,941.48. The key 30-share index had climbed to as high as 1,959 earlier in the session after surging 65.82 points on Monday.
But the Dow retreated from its best levels after bank shares tumbled on news that the Bank of Boston was writing off $200 million of its Latin American loans.
“This is an acknowledgment by one bank that these loans are not worth anything,” a broker said. “People figure that the big New York banks may be forced to do the same and maybe they are not strong enough for that.”
Energy stocks also slipped back because of the sharp drop in oil prices, which reflected disappointment with Monday’s OPEC accord to hold down oil production in the cartel.
Falling oil prices, however, boosted the Dow Jones transportation index 9.86 points to 731. A rise in the transportation indicator is considered a bullish sign for the rest of the market.
Advancing issues led decliners by a margin of about 9 to 7 among stocks listed on the New York Stock Exchange.
Good Investor Sentiment
Volume on the Big Board came to 214.97 million shares, compared to Monday’s 187.69 million shares.
“Investor sentiment is pretty good right now,” said analyst Eugene Peroni of Janney Montgomery Scott. “There is an appetite to try and rebuild the losses incurred earlier, though skepticism is still around.”
The blue chip Dow indicator has advanced in six of the past seven sessions, brushing aside the dollar’s weakness and gaining more than 175 points.
“It is a tribute to its persistence. When the market is able to move against a negative news background--that is encouraging,” said analyst Hildegard Zagorski of Prudential-Bache Securities.
The dollar fell for the fourth straight day on Tuesday, sinking to 126.70 Japanese yen in Tokyo, as doubts lingered about the Reagan Administration’s plans to defend the currency.
Investors have been concerned about buying stocks in the face of a declining dollar, which tends to lower overseas demand for U.S. securities, driving up interest rates. But a bond market rally Tuesday reduced concerns over the dollar.
Brokers said investors, heartened by recent economic indicators that showed the economy was not slipping into recession, had resumed buying stocks that should benefit from moderate economic growth and a cheaper dollar.
“We think that consumer spending will slow down, but industrial America has whipped itself into a lean and mean shape and we are recommending those kinds of stocks,” Zagorski said.
Airline stocks surged because the drop in oil prices means their fuel costs will fall sharply. AMR, parent of American Airlines, rose 1 to 32 3/8; Delta 2 1/8 to 37 3/4; NWA, parent of Northwest Airlines, 1 1/8 to 35 3/8, and USAir 1 1/2 to 32.
Oil company stocks fell again as traders were disappointed with OPEC’s agreement to roll over existing price and production standards for cartel members, excluding Iraq. Chevron fell 7/8 to 37 7/8, Exxon 1/2 to 39 3/8 and Mobil 1 to 36 3/4.
The decline in oil prices, which slipped 81 cents to $16.63 a barrel for the January futures contracts, further undermined shares in the nation’s big banks. Many of their loans are to countries that depend on oil exports for revenues.
While analysts were not convinced the Bank of Boston’s writeoff would set a trend, the action focused new attention on the problematic loans to less-developed countries held by other banks.
Several major banking companies fell to 52-week lows in a selloff that analysts said stemmed from concerns that banks with major loans outstanding to less-developed countries may not get their money back.
Bank of Boston gained 1/2 to 20 3/4 as investors viewed its decision to write off a chunk of Third World loans as a responsible move, but shares in most other banks fell.
Citicorp led the NYSE’s list of most actively-traded stocks, falling 7/8 to 16 5/8.
Elsewhere in the banking group, Chemical New York fell 3 to 20 3/4, Chase Manhattan tumbled 2 to 20 1/8, First Chicago fell 1 1/2 to 17, Manufacturers Hanover lost 2 3/8 to 24, J. P. Morgan fell 1 1/2 to 30 and BankAmerica dipped 1/8 to 7 1/8.
Among other actively-traded issues, General Electric rose to 45 1/2, International Business Machines climbed 7/8 to 116, Exxon fell 5/8 to 39 and American Telephone & Telegraph slipped 1/8 to 28.
Gold mining stocks were lower, reflecting lower gold prices. ASA fell 3 to 49 3/4, Homestake Mining lost 1 to 16 5/8 and Newmont Mining fell 2 5/8 to 35 1/2.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 244.95 million shares.
In London, share prices finished higher on the London Stock Exchange but below the day’s peak as subsiding buying interest stemmed an earlier rally.
The Financial Times-Stock Exchange 100-share index rose 17.4 points to close at 1,670.0. The index had been up as much as 28.6 points at 10:45 a.m. local time. Volume was moderate.
Trading was moderate in Tokyo, where the Nikkei average of 225 selected issues gave up 79.55 yen to close at 22,846.73 yen.