Financial Markets : Erratic Market Closes Higher; Dow Rises 4.60
Stocks seesawed Wednesday but ended mostly higher, supported by a late recovery in the bond market.
The Dow Jones index of 30 industrials rose 4.60 to close at 2,480.15.
Advancing issues outnumbered declines by a margin of about 8 to 5 in nationwide trading of New York Stock Exchange-listed stocks, with 896 up, 558 down and 505 unchanged.
After a weak opening, stocks rebounded following a government report that its chief economic forecasting gauge shot up 0.8% in April. The index of leading economic indicators had declined during the previous two months and economists had warned that a third consecutive decline would signal a recession.
The market quickly lost ground, however, as the dollar slipped and bonds declined following a second report from the Commerce Department that showed orders to U.S. factories rose 2.7% in April, the best showing in four months.
That report indicated that the economy is still going strong, prompting speculation that the Federal Reserve might not loosen its hold on interest rates.
The impact was brief, though, as fear of Fed tightening faded and the dollar recovered from earlier sluggishness, lifting bond prices and inciting some late afternoon buying on Wall Street.
Late word that the West German Bundesbank might not raise its discount rate also firmed prices before a last-minute selling spree eliminated much of the gains in the final minutes of trading.
Volume on the floor of the Big Board totaled 162.53 million shares, up from 151.78 million shares Tuesday.
Among blue chip stocks, IBM gained 1 3/8 at 109 5/8. Digital Equipment rose 3/8 at 91 7/8, Motorola advanced 1 5/8 to 56 3/8 and Philip Morris gained 1 1/8 to 139 1/8.
Time Inc. tumbled 8 to 127. It had risen sharply over the last couple of weeks on speculation that a bidder would emerge to derail its planned merger with Warner Communications, but no bidder turned up. Warner rose 7/8 to 51 3/4.
The Tokyo stock market bounded to a record close, helped by speculation that Japanese workers will invest some of their hefty midyear bonuses in stock, brokers said. The key 225-share Nikkei index climbed 189.86 to end at a record 34,266.75.
Share prices closed substantially lower on the London Stock Exchange, pressured by an early round of selling related to program trades and by further upward pressure on interest rates as the British pound continued to slump. The Financial Times 100-share index fell 15.6 to close at 2,114.4.
Dollar
The dollar slumped amid speculation about central bank maneuvering.
There were rumors that the Federal Reserve and possibly other central banks were selling dollars more discreetly than they have in the past.
During most of the dollar’s recent run-up, the central banks tried to gain extra psychological impact by allowing their market interventions to become public. That strategy did not appear to work.
Several times Wednesday the dollar appeared to be under downward pressure even though dealers could not pinpoint anyone who was selling, said Jerry Egan, chief currency dealer for Bank of Boston.
The lone currency against which the dollar rose in New York was the Japanese yen. In Tokyo, where trading ends before Europe’s business day begins, the dollar fell 0.40 yen to a closing 142.70 yen. Later, in London, it was quoted at 142.30 yen. In New York, the dollar rose to 142.90 yen from 142.75.
In London, the dollar fell against the British pound. It cost $1.5682 to buy one pound, more expensive than $1.5570 late Tuesday. In New York, the pound rose to $1.5735 from $1.5710.
Gold prices fell in New York after having been up in Asia and Europe.
In Hong Kong, gold rose $1.95 an ounce to a bid of $364.68.
Gold rose in London to a late bid of $363.50, compared to $362.25 late Tuesday. In Zurich, Switzerland, gold rose to $363.43 from $362.10.
Commodities
Coffee futures prices fell on New York’s Coffee, Sugar & Cocoa Exchange amid growing pessimism about next week’s special meeting of the International Coffee Organization.
On other markets, precious metals slid, grains and soybeans were mostly lower, energy futures were mixed, cattle futures were mixed and pork futures advanced.
Coffee settled 2 cents to 4.08 cents lower, with the contract for delivery in July at $1.3068 a pound.
The selloff was prompted by a report that John Rosenbaum, the U.S. chief delegate to the International Coffee Organization, remained determined not to attend the talks in London unless coffee producers first offer a proposal acceptable to the United States.
The five-day meeting of most of the world’s largest coffee-producing and coffee-consuming nations is aimed at producing a new International Coffee Agreement to replace the six-year pact that expires Sept. 30.
The United States, the organization’s largest consumer member, is resisting a push to simply extend the existing agreement, calling instead for tighter restrictions on sales of coffee at discount prices to countries that are not members of the organization.
“I’d say the odds for an agreement are 50-50, and it’s unlikely that anything will be hammered out until it comes down to the wire in September,” said Sandra Kaul, a market analyst in New York with Shearson Lehman Hutton Inc.
Analyst Arthur Stevenson of Prudential-Bache Securities in New York said the selling was also a reflection of the mild weather in Brazil, the world’s largest coffee producer, at the beginning of the South American winter season.
“The market will be increasingly trading off the weather in Brazil,” Stevenson said.
Most grain and soybean futures prices retreated on the Chicago Board of Trade as forecasts for more rain in the Corn Belt quieted fears of a second year of drought.
Crude oil futures prices notched lower while futures prices for refined products ended mixed on the New York Mercantile Exchange in choppy activity fueled by conflicting statements from various ministers of the Organization of Petroleum Exporting Countries regarding oil production and demand.
Credit
Bond prices rebounded in late trading as a Federal Reserve staff report fueled investor optimism that inflation would moderate.
The Treasury’s bellwether 30-year bond rose 5/16 point, or more than $3 per $1,000 face amount, while its yield, which moves in the opposite direction from its price, fell to 8.60% from 8.62% on Tuesday.
The federal funds rate, the interest on overnight loans between banks, traded at 11%, up from 9.75% late Tuesday. The jump was attributed to technical factors.
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