FINANCIAL MARKETS : Dow Adds 4.59, Rides Rally Fueled by Offers, Lower Interest Rates
The stock market churned ahead Thursday, squeezing a little more mileage out of its recent rally fueled by takeover news and rumors and declining interest rates.
The Dow Jones index of 30 industrials rose 4.59 to 2,516.91, bringing its gain over the past three sessions to 36.21 points.
Advancing issues outnumbered declines by about 5 to 4 in nationwide trading of New York Stock Exchange-listed stocks.
Volume on the floor of the Big Board came to 212.31 million shares, against 213.71 million the previous session.
The Dow finished the day just short of last Friday’s post-crash high of 2,517.83 and still more than 200 points below its 1987 peak.
However, the index at the American Stock Exchange climbed to a record, topping its best levels recorded in the summer of 1987.
New takeover bids this week for Time Inc. and Lin Broadcasting touched off buying in a wide range of stocks thought to be possible candidates for acquisitions or buyouts.
Eastman Kodak, said to be a potential target, climbed 3/8 to 50 7/8 in heavy trading.
Mattel Declines
Time stock, meanwhile, dropped 2 to 168 and Lin lost 4 1/2 to 125 in the over-the-counter market after both experienced dramatic run-ups in Wednesday’s trading.
Mattel shares continued to decline, despite an assurance from the Hawthrone toy maker that production in China continued without interruption. Mattel closed at 12 7/8, down 1/8, on the NYSE.
The company produces 25% of its toys--including Barbie clothes and accessories, Disney preschool toys and P. J. Sparkles doll--at two factories 1,500 miles from Beijing near the Hong Kong border. Mattel said it could quickly shift production to factories in Manila, Mexico or Europe, if necessary.
Burlington Resources, the volume leader among NYSE issues, fell 2 to 44 3/8. Pennzoil, which had been considered a possible bidder for Burlington, sold its stake of 11.7 million shares in a block at 45 1/4.
Pennzoil, having reaped a healthy profit on the investment, gained 4 5/8 to 84 5/8.
Beyond the takeover hubbub, analysts say the market has benefited from signs this week that the Federal Reserve might be starting to change course in its credit policy.
Energy Mostly Lower
After more than a year of tightening credit conditions, the Fed is widely believed to have made an initial step toward easing, by permitting a decline in the interest rate on federal funds, or overnight loans between banks.
Energy stocks were mostly lower amid skepticism that members of the Organization of Petroleum Exporting Countries would adhere to oil production quotas set this week.
Exxon dropped 1/2 to 43 3/4; Texaco slipped 1/4 to 49 5/8; Amoco fell 1 3/8 to 43 3/8; Atlantic Richfield dropped 1 3/4 to 91 5/8, and Chevron fell, 1 1/2 to 53 3/8.
Stock prices closed sharply higher in heavy trading Thursday on the London Stock Exchange amid a favorable economic background and some institutional buying. The Financial Times 100-share index finished 25.5 points, or 1.2% higher at 2,143.4.
On the Tokyo Stock Exchange, the 225-share Nikkei index closed the day at 33,718.29, gaining 91.40 points.
Commodities
Grain and soybean futures prices declined on the Chicago Board of Trade because of continued pressure from favorable weather forecasts and slack demand.
On other markets, copper prices were up while precious metals were down; energy prices rallied; livestock and meat futures were down, and sugar and cotton prices rose.
Wheat futures, which have been declining because of the political turmoil in China, were off for the third consecutive trading session. Analysts say the problems in China may mean that country won’t place new orders for U.S. wheat.
“There was some concern over China and additional wheat sales, but the market lacked any real direction,” Frank Kouba, an analyst with Shearson Lehman Hutton in Chicago, said Thursday.
Soybean futures were mixed, getting a boost from a threatened sales boycott by Brazilian farmers who say they are worried about their government’s exchange rate policy.
In addition, dockworkers in Brazil are threatening another nationwide port strike, which would hamper Brazilian soybean exports.
Corn prices were pressured by light demand and reports of improved growing conditions in major crop areas.
Wheat settled 0.25 cent to 1.50 cents lower, with the contract for delivery in July at $3.8175 a bushel; corn was 3 cents to 5 cents lower, with July at $2.5325 a bushel; oats were 1.50 cents to 2.50 cents higher, with July at $1.65 a bushel, and soybeans were 5.75 cents lower to 3 cents higher, with July at $7.14 a bushel.
Copper futures moved higher on New York’s Commodity Exchange on speculation about supply disruptions.
The start of contract talks next week between U.S. producers and their unions, with the possibility of strikes, and the continued closure of Bougainville Copper Ltd.’s Papua, New Guinea, mine boosted prices, said Bette Raptopoulos, an analyst with Prudential-Bache Securities in New York.
Copper settled 1.10 cents to 2.50 cents higher with June at $1.35 a pound.
Precious metals prices declined as the dollar showed renewed strength.
Gold settled $2.60 to $3.10 lower, with June at $373.50 an ounce; silver was 2.1 cents to 2.7 cents lower, with June at $5.443 an ounce.
Energy futures mostly were higher on the New York Mercantile Exchange in reaction to promises by Kuwait to cut back oil production.
Kuwaiti Oil Minister Sheik Ali al Khalifa al Sabah said his country intended to produce 1.35 million barrels a day in coming months.
On Wednesday the Organization of Petroleum Exporting Countries signed a new production accord that placed Kuwait’s new quota at 1.093 million barrels. Its current output is estimated at nearly 2 million barrels a day.
Livestock and meat futures were mixed in lackluster trading on the Chicago Mercantile Exchange.
Credit
Bond prices moved moderately higher as traders grew more optimistic about the economy ahead of the government’s producer price report, which is to be reported today.
The credit market’s bellwether 30-year Treasury bond rose 1/4 point, or $2.50 for every $1,000 in face amount, after rising nearly a full point on Wednesday.
The bond’s yield, which moves in the opposite direction from price, fell to 8.29%--its lowest level since February, 1988--from 8.31%.
“All of the bias in the market seems to be in an upward direction,” said Elizabeth Ginste Reiners, a vice president with Dean Witter Reynolds.
The federal funds rate, the interest that banks charge each other for short-term loans, was unchanged at 9.375%
A decline in the fed funds rate during the past few weeks has been interpreted by analysts as a sign that the Fed is shifting toward a more generous credit policy.
Currency
The dollar finished mixed against foreign currencies in light trading ahead of today’s release of figures on U.S. wholesale price inflation.
Gold prices moved lower.
The dollar rose against the Japanese yen and French franc but fell against other major currencies.
Dealers said the dollar rose briefly against the West German mark on rumors that U.S. citizens were injured or killed in China. The dollar eased after the U.S. State Department said it had no information to confirm those reports.
Traders were uncertain about how the dollar might be affected by the Labor Department’s report on the Producer Price Index for May.
Cases could be made that either a big inflation increase or a small one was good for the dollar, said Craig Sloane, a currency analyst at Smith Barney, Harris Upham & Co. On the other hand, he said, the dollar also could fall in reaction to a big or small increase.
Gold moved lower in London to a late price of $373.25 an ounce, from $375.65 Wednesday. In Zurich, the bid price was $374.35, down 15 cents from late Wednesday.
Tables begin on Page 6
