Bargain Hunters Pull Stocks From Early Slump; Dow Posts 3.99 Gain
Stock prices rose modestly Tuesday, spurred by a late bout of program buying and bargain hunting one day after the biggest decline in nearly two months.
The Dow Jones average of 30 industrials finished up 3.99 at 2,650.99 after having been down roughly 20 points in late-morning trading. Other indicators were mixed.
Tuesday at first appeared to be a repeat of Monday’s decline, when the Dow Jones industrials fell 40.97. But stocks began to rise around noon, leveled off and then erased all their losses with a spurt of program trading in the final hour.
Traders said there was no major news to account for either the early decline or the late recovery. Although stocks were dragged down initially by weakness in the bond market, they climbed back even though bonds remained weak.
The stock market is stalled short of the 1987 all-time high of 2,722.42 on the Dow Jones industrials by the doldrums in the bond market, said Lincoln Anderson, a Bear, Stearns & Co. economist.
“The bond market is interpreting everything negatively. I don’t know what you could give the bond market right now that would turn it around in the short run,” Anderson said.
Declining issues outnumbered advancing ones by about 4 to 3 in nationwide trading of New York Stock Exchange-listed stocks.
Big Board volume totaled 141.93 million shares, up from 136.80 million Tuesday.
Strong gains by two Dow Jones industrials components led the average higher: Philip Morris rose 2 to 157, and International Paper gained 2 3/8 to 55 1/4.
Georgia Gulf leaped 7 1/4 to 58 3/4, exceeding the $55-a-share offer for the company by Harold C. Simmons’ NL Industries. It was the most active NYSE issue, with composite volume of 2.6 million shares.
Anchor Glass Container closed unchanged at 20. The Tampa, Fla.-based company rejected a $20-a-share takeover offer from Mexico’s Vitro S.A. Goldman, Sachs & Co. said it holds a 9.7% stake in the company.
Lyphomed led the over-the-counter stocks in trading volume, unchanged at 30 1/4. Japan’s Fujisawa Pharmaceutical has offered $31 a share for the generic drug maker.
Tokyo share prices closed mostly lower in thin trading, with the key Nikkei index pulling back slightly from its record close the day before. The Nikkei 225-share index eased 26.48 to close at 35,114.35, after climbing 77.69 to a new high Monday.
Share prices also ended lower on the London Stock Exchange as a weak opening on Wall Street undermined the London market. The Financial Times 100-share index ended down 3.9 at 2,370.8, down from a session high of 2,385.2.
Credit
Bond prices fell as new government data indicating economic strength led to disappointing results in a Treasury refinancing auction.
The Treasury’s benchmark 30-year bond tumbled 27/32 point, or $8.44, per $1,000 face amount. Its yield climbed to 8.25% from 8.17% late Monday.
Bond prices fell slightly in morning trading after the Commerce Department’s durable goods orders report, which sent mixed signals to the credit market.
Orders for goods expected to last at least three years fell 1.9% in July, but the June figure was revised to a 1.4% increase from 0.4%, further indicating that the country may not be heading for a recession.
In the secondary market for Treasury bonds, prices of short-term governments fell 1/4 point to 3/8 point, intermediate maturities were down 7/16 point to 3/4 point and long-term issues fell 3/4 point, according to Telerate Inc., the financial information service.
The movement of a point equals a change of $10 in the price of a $1,000 bond.
The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 5.92 to 1,169.69.
In corporate trading, industrials were down. Moody’s investment grade corporate bond index, which measures total return on a portfolio of 80 corporate bonds with maturities of five years or longer, fell 1.17 to 327.44.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds was 92-21/32, down 3/8 point. The average yield to maturity rose to 7.37% from 7.33% late Monday.
Yields on three-month Treasury bills issued at auction Monday jumped to 8.32% as the discount rose 7 basis points to 8.05%. Yields on six-month bills issued Monday rose to 8.45% as the discount was up 16 basis points to 8.00%. Yields on one-year bills were up to 8.45% as the discount gained 10 basis points to 7.87%.
A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.
The federal funds rate, the interest on overnight loans between banks, was trading at 8.875%, unchanged from late Monday.
Currency
The dollar fell sharply against most key currencies in thin, nervous trading, pressured by concern that West Germany’s central bank could be raising interest rates soon.
Currency dealers said speculation that the West German Bundesbank plans to boost interest rates at a regular meeting later this week sent the dollar tumbling against the mark. In both U.S. and European trading, the dollar slipped below the psychologically important 1.95-mark level.
“The 1.95-mark level was a big chart point,” explained one dealer in Europe. “When the dollar broke through that level it triggered a lot of stop-loss orders, which pushed it lower.”
Higher interest rates tend to support a currency partly because they make securities denominated in that currency more attractive to foreigners.
Trevor Woodland, chief corporate trader for Harris Trust & Co. in Chicago, said the dollar also was depressed by a drop in the stock and bond markets. But he said the dollar showed little reaction to a government report that durable good orders tumbled 1.9% in July to the lowest level in nine months.
In Tokyo, where trading ends before Europe’s business day begins, the dollar fell 0.57 Japanese yen to 142.78 yen. It closed at 142.52 yen in London, and at 142.145 yen in New York, down from 143.05 yen late Monday.
The pound rose in London and in New York. It cost $1.5840 to buy one pound in London, up from late Monday’s $1.5745. Sterling fetched $1.5891 in New York, up from $1.5717.
Gold prices also slipped after gaining overseas.
On the Commodity Exchange in New York, gold bullion for current delivery closed 50 cents lower at $367.90 an ounce. Republic National Bank of New York quoted a late bid of $366.25, down 10 cents.
Commodities
Prices of sugar futures rose sharply Tuesday amid rumors that India had made a long-expected purchase of refined white sugar on the world market to partly offset its projected shortfall of nearly 1 million metric tons.
On other markets, grain and soybean futures finished mostly higher while livestock, oil and precious metal futures were mixed.
Sugar futures settled 0.42 cent to 0.60 cent higher on New York’s Coffee, Sugar & Cocoa Exchange, with the contract for delivery in October at 13.95 cents a pound.
World sugar stocks are so low, because of several years of poor sugar cane crops and steadily rising consumption, that any hint of new purchases by large-scale consumers such as India, China or the Soviet Union tends to throw the market into a bullish frenzy.
There was no confirmation of Tuesday’s rumor, which began on the United Terminal Sugar Market in London.
Analysts said Indian buying had been expected for months. India’s government recently approved emergency funds to buy refined white sugar, known as “whites” in the trade.
A late flurry of technically inspired buying pushed most grain and soybean futures higher on the Chicago Board of Trade.
Most of the action was in the soybean complex after the expiration at noon of the contracts for August delivery of soybeans, soybean meal and soybean oil, analysts said.
August soybeans went off the board at $6.06 a bushel, 22 cents lower than Monday’s settlement prices.
Wheat settled 0.25 cent lower to 0.50 cent higher, with September at $3.905 a bushel; corn was 2 cents to 4 cents higher, with September at $2.3825 a bushel; oats were 2 cents to 2.25 cents higher, with September at $1.41 a bushel, and soybeans, excluding August, were 6.50 cents lower to 9 cents higher, with September at $6.03 a bushel.
Most cattle futures prices rose on the Chicago Mercantile Exchange in line with higher spot market prices for fed cattle. Hog futures were mixed while pork belly futures advanced on expectations of stronger demand for bacon.
Live cattle settled unchanged to 0.35 cent higher, with the contract for delivery in September at 74.10 cents a pound; feeder cattle were 0.02 cent lower to 0.15 cent higher, with August at 84.20 cents a pound; live hogs were 0.05 cent lower to 0.25 cent higher, with October at 40.65 cents a pound, and frozen pork bellies were 0.02 cent to 1.08 cents higher, with August at 26.82 cents a pound.
