Stocks Recoup Tuesday’s Loss; Dow Up 6
Takeover speculation pushed share prices modestly higher Wednesday, but market enthusiasm was limited as investors continued to fret about the economy’s direction.
The Dow Jones industrial average rose 6.60 points to 2,304.80, exactly recovering Tuesday’s decline. Advances led declines 783 to 608 in active New York Stock Exchange trading of 165.9 million shares, compared to 160.7 million Tuesday.
“The market is still dominated by speculators. But nobody has any conviction about the long-term direction of the economy, interest rates or the market,” said Michael Metz of Oppenheimer & Co.
Analysts said it was difficult to discern how the market might respond when the Labor Department issues its monthly report Friday on the employment situation.
Private forecasts generally call for a smaller gain in nonfarm payroll employment than the 289,000 increase reported for February, when the unemployment rate fell to a 15-year low.
Not so long ago, that kind of news might have been interpreted as an emphatic plus for stocks, indicating a slackening of upward pressure on inflation and interest rates.
But lately many traders have begun to worry that the battle to restrain inflation might wind up producing a recession and an accompanying slump in corporate profits.
Auto stocks fell after reports Tuesday for the late-March selling period showed a continuing slowdown in domestic car sales. General Motors dropped 7/8 to 39 7/8; Ford Motor slipped 1 1/8 to 47 1/2, and Chrysler was down 3/8 to 24 1/8.
NWA climbed 3 7/8 to 87 5/8. Financier Marvin Davis said he did not intend to break up the company after completion of his $90-a-share takeover offer and might even raise the bid “if additional value can be demonstrated.”
Most Japanese stocks ended lower Wednesday, but the key Nikkei 225-share index managed its sixth straight record close, rising 48.54 points, or 0.15%, to 33,360.79, but declining issues outpaced gainers 457-431.
In London, share prices closed lower as the market remained preoccupied about the outlook for the pound and British interest rates. The Financial Times 100-share index fell 4.6 points to close at 2,078.2.
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CURRENCY
The dollar moved moderately higher against major foreign currencies in what analysts called a technical adjustment following its recent slump.
Gold prices fell. Republic National Bank of New York quoted a bid of $383.30 for an ounce of gold as of 4 p.m. EDT, down from $385.90 late Tuesday.
Wednesday’s modest gains at least temporarily ended the dollar’s decline, which began last week. At that time, the central banks of several nations intervened in the foreign exchange markets to bring the U.S. currency lower.
But Ronald Holzer, chief foreign exchange dealer with Harris Trust & Savings Bank in Chicago, said the dollar’s advance Wednesday was a minor adjustment and that the currency’s outlook remained bearish, partly because the seven major industrial nations have restated their desire for stable interest rates.
Overseas dealers said market activity was quiet as traders awaited Friday’s U.S. unemployment figures for March which could give some fresh insight into the direction of the American economy.
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CREDIT
Government bond prices fell slightly in slow, cautious dealings as traders awaited fresh economic news.
The benchmark 30-year Treasury bond showed a loss of 1/8 point, or about $1.25 per $1,000 in face amount, while its yield edged up to 9.02% from 9.01% late Tuesday.
Oil prices dropped sharply and the dollar edged higher, both of which are ordinarily positive signs for bond prices. But bond traders showed little reaction to the news, said Kathleen Camilli, an economist at Drexel Burnham Lambert Inc.
She said traders were reluctant to establish big positions ahead of Friday’s release of the employment report for March, which could have a big effect on bond prices.
“People have already placed their bets” on the job report, said Maury Harris of Paine Webber Inc. “They’re at the post waiting to see the numbers. Friday morning at 8:30 will be post time.”
The federal funds rate, the interest on overnight loans between banks, was quoted at 8.5%, compared to 9.625% late Tuesday. Analysts said the decline was related to technical factors and did not have any policy significance.
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COMMODITIES
Copper futures prices soared, recovering from five consecutive declining sessions, and the stabilized U.S. dollar sent gold prices lower on the Commodity Exchange in New York.
On other futures markets, prices for soybeans advanced, grains were mixed, cattle were higher and pork declined.
Although the trading volume was light, May copper shot up 190 points during the Comex session, then settled 90 points higher, after falling 570 points on Monday. A point is one-hundredth of a cent.
Metals analyst George Anagnos of Thomson Mckinnon Securities Inc. said the rally stemmed partly from the belief that the market has been oversold. He also said prices rose because production has declined and demand is rising.
Energy futures prices tumbled on the New York Mercantile Exchange.
Unleaded gasoline prices were down the 200-point limit in the most active months, inciting a selling spree in crude oil futures and heating oil.
Analysts believe that last week’s rally was overdone, and this week’s activity is a technical correction for the market.
Crude oil settled 43 cents to 58 cents lower, with the contract for delivery in May at $19.99 a barrel; heating oil was 1.47 cents to 2.01 cents lower, with May at $1.63 a gallon, and unleaded gasoline was 1.54 cents to 3.03 cents lower, with May at 66.43 cents a gallon.
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