Dow Up 6.76, Ending 5-Day Losing Streak
The stock market snapped a five-session losing streak Monday, closing with moderate gains in a slow session marked mainly by indecision.
The Dow Jones index of 30 industrials, down 92.42 last week, recovered 6.76 to 2,603.48.
Declining issues outnumbered advances of New York Stock Exchange-listed stocks, with 684 up, 774 down and 482 unchanged.
Big Board volume was 126.63 million shares, down from 170.33 million Friday and the lightest total in three weeks.
Analysts said the market got some benefit from bargain hunting by traders attracted to stocks that have been hit by selling this month.
They also noted hopes for evidence in the next few days that the economy was maintaining a moderate pace of growth, despite a recent barrage of disappointing corporate earnings reports.
The government is due to report today on the index of leading economic indicators for September. Advance estimates call for the index, which is designed to function as a kind of economic crystal ball, to show a modest increase.
However, concern has spread on Wall Street lately that corporate earnings will be disappointing for some time to come, even if the economy isn’t headed for a full-fledged recession.
The proliferation of unpleasant surprises in third-quarter earnings reports issued to date “is in stark contrast to the experience of 1987, 1988 and early 1989,” noted Abby Joseph Cohen, an analyst at Drexel Burnham Lambert Inc. “During that period, persistently rising profit expectations provided support to rising stock prices.”
Shares in UAL Corp. rose 4 to close at 175 on the New York Stock Exchange after The Times reported Saturday that Los Angeles investor Marvin Davis was preparing a new bid for the parent of United Airlines.
The Times reported that Davis won’t bid without labor support, but it’s not likely that all of United’s labor unions will back him. John Peterpaul, vice president of the International Assn. of Machinists, said Monday it would be “very, very difficult” to work with Davis. Meanwhile, there was speculation that Condor Ltd., a partnership formed Oct. 24 by Coniston Partners of New York, has bought more than 5% of UAL shares and might bid for the company. Among actively traded blue chips, Philip Morris gained 3/4 to 42 1/8; General Electric rose 3/8 to 54; International Business Machines lost 3/8 to 99 1/2, and Exxon was down 5/8 at 45 1/8.
Unisys fell 1 to 15 1/4 in active trading after dropping 3/4 on Friday. Last week, the company reported a third-quarter loss that included charges for restructuring.
In Tokyo, profit taking on issues that rose last week and foreign arbitragers selling stocks underlying the index forced down Tokyo stock prices early in the day and kept them there until the close, brokers said. The 225-share Nikkei index fell 109.85 to close at 35,417.44.
On the London Stock Exchange, share prices closed sharply higher in the year’s thinnest volume, supported largely by a technical bounce after last week’s steep declines. The Financial Times 100-share index finished 30.1 points higher at 2,112.2.
Credit
Bond prices finished slightly higher in trading that was restrained by concerns about the economic outlook and whether Congressional inaction on raising the debt ceiling could delay a new Treasury auction.
The Treasury’s benchmark 30-year bond edged up 5/32 point, or about $1.25 for every $1,000 face amount, while its yield, which falls when prices rise, slipped to 7.92% from 7.93% late Friday.
Bond prices moved in a fairly narrow range in quiet dealings as traders awaited congressional action on the debt ceiling and the economic reports due later this week, including U.S. employment statistics for October.
The federal funds rate, the interest on overnight loans between banks, was quoted at 8.75%, up from 8.688% late Friday.
Currency
The dollar was mixed against the major foreign currencies, while the British pound advanced for the first time since last week’s political upheaval in London.
There was no news to affect currency dealings, and analysts said investors spent the day squaring their positions following the pound’s sharp decline late last week.
Sterling chalked up its first gains since Chancellor of the Exchequer Nigel Lawson resigned last Thursday night and caught many traders by surprise.
Robert Ryan, an analyst with the Bank of New York, said sterling’s rise reflected short covering, the buying of dollars to fulfill previous agreements to sell them.
The pound rose to $1.5825 in New York, up from late Friday’s $1.5795, after closing earlier in London at $1.5785, up from $1.5750 Friday.
Some dealers warned, however, that sentiment toward sterling remained bearish.
“You’re bucking the trend if you try to take the pound higher right now,” said a corporate dealer at a U.S. bank in London. “I’m not convinced the pound’s fall has stopped.”
Traders said they did not expect the dollar to move far away from its current levels this week unless today’s release of the September index of leading economic indicators or Friday’s unemployment report provided some surprises.
Late dollar rates in New York, compared to late Friday’s rates, included: 1.8340 West German marks, up from 1.8295; 1.6050 Swiss Francs, up from 1.6005; 6.2265 French francs, up from 6.2150; 1,346.00 Italian lire, down from 1,348.00, and 1.1735 Canadian dollars, down from 1.1747.
Commodities
Copper futures prices fell sharply on New York’s Commodity Exchange, extending the market’s 2-week-old slide amid new selling prompted by a continued easing of supply fears.
On other futures markets, precious metals retreated; pork bellies surged while livestock futures were mixed; oil futures fell; grains and soybeans slipped, and stock index futures were narrowly mixed.
Copper settled 0.30 cent to 3.35 cents lower, with the contract for delivery in December at $1.128 a pound, its lowest price since Aug. 10.
Copper traders began selling at the opening bell in reaction to the London Metal Exchange’s report of a smaller-than-expected 550 metric ton decline in warehouse stocks of copper last week. The market had expected a drawdown of as much as 4,000 tons.
Gold and silver futures fell modestly on the Comex.
