FINANCIAL MARKETS : Dow Gains 3; Trade Figures Give Little Help
The stock market churned in place Thursday, getting little benefit from news of a smaller than expected U.S. trade deficit.
The Dow Jones index of 30 industrials rose 3.08 to 2,635.66.
But declining issues slightly outnumbered advances in nationwide trading of New York Stock Exchange-listed stocks, with 735 up, 748 down and 498 unchanged.
The business day began with a report from the Commerce Department that the nation’s trade deficit contracted to $7.94 billion in September from $10.10 billion the month before.
The margin by which imports exceeded exports was the smallest in nearly five years and was well below most advance estimates.
Traders said some of the lackluster trading was due to anticipation of the expiration of stock-index options and futures today.
Dun & Bradstreet led the active list, down 2 at 42 1/2 on top of a 5 3/4-point drop Wednesday, when the company said it expects to post lower earnings in 1990 as it revamps its credit-services business.
Among actively traded blue chips, General Electric rose 3/4 to 57 1/2; Philip Morris gained 3/8 to 41 1/8, and American Express was up 1 1/8 at 34 5/8. But International Business Machines dropped 3/4 to 97 1/8.
The General Services Administration said it was investigating IBM’s sale to the government of used computer equipment marked as new.
Expectations of lower interest rates helped electric utility issues gain ground, pushing the Dow Jones index of 15 utilities up 0.82 to 222.40, its highest close in more than two years.
Big Board volume came to 148.37 million shares against Wednesday’s 155.13 million.
Tokyo stocks posted a record close, continuing a seven-day rally in fairly heavy trading, but the gains were limited due to nervousness about recent climbs. The 225-share Nikkei index edged up 24.11 points to close at 35,876.34, its fourth consecutive record high.
Stock prices also rose on London’s stock exchange, helped by some strong corporate earnings reports, takeover speculation and favorable economic news. The Financial Times 100-share index rose 6.4 points to 2,209.8.
Credit
Bond prices fell modestly amid conflicting interpretations of the decline in the U.S. merchandise trade deficit, which fell to the lowest level since 1984.
The Treasury’s closely watched 30-year bond fell 5/32 point, or about $1.50 for every $1,000 in face value. Its yield, which rises when the price falls, rose to 7.86% from 7.85% late Wednesday.
Some analysts said the shrinkage in the trade deficit to $7.9 billion in September should have helped bond prices by bolstering the dollar. A strong dollar is good for bonds.
Also, imports fell sharply, and that is usually good for bonds by indicating an economic slowdown.
But pessimists decided that imports had fallen less than hoped, and they noted that exports rose. A rise in exports indicates economic strength, which is a negative for bonds because it can contribute to inflation.
Bond investors decided that the trade report would not impel the Federal Reserve to cut interest rates to stimulate the economy.
The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 8.50%, unchanged from late Wednesday.
Currency
The dollar rallied on news of a big improvement in the country’s trade balance but finished below its best levels due to technically motivated selling.
Gold prices edged up in U.S. trading after posting sharp gains overseas.
On the Commodity Exchange in New York, gold bullion for current delivery ended at $391.40 an ounce, up 10 cents from Wednesday’s settlement. The Republic National Bank of New York quoted an ounce of gold at $391.30 as of 4 p.m. EST, 40 cents higher than Wednesday’s late bid.
The dollar got off to a strong start in U.S. foreign exchange trading. It gained support from the merchandise trade deficit report.
But the deficit’s unexpectedly sharp decline caught some currency investors unprepared and forced them to adjust their holdings by selling dollars. The market had anticipated a deficit of about $8.9 billion.
Rumors that the Federal Reserve Board was selling dollars to mute the rally accentuated the downtrend that had been touched off by the technically oriented sales. The Fed never comments on any day-to-day currency transactions. Some dealers said they doubted the central bank had actually intervened.
Mixed emotions about what the Commerce Department’s trade report meant also snuffed out some of the enthusiasm to buy dollars. One interpretation was that the slowdown in imports underscored the weakness in U.S. economic growth, which would strengthen the case for lower interest rates.
A decline in U.S. interest rates would tend to lessen demand for dollars and make returns on dollar-denominated investments less attractive.
The dollar began its trading day in Tokyo with a rise of 0.48 Japanese yen to close at 143.85 yen. Later, in London, it edged up to 143.90 yen and rose to 144.25 yen in New York from 143.795 on Wednesday.
In London, the British pound fell to $1.5805 from $1.5810 late Wednesday. The pound fetched $1.5755 late in New York, compared to $1.5803 Wednesday.
Commodities
Grain and soybean futures prices rose on the Chicago Board of Trade amid hopes that the warming of U.S.-Soviet relations would lead to greater grain sales to the Russians.
But analysts were skeptical, saying the Soviets already seem able to buy as much grain as they want.
On other commodity markets Thursday, coffee prices fell sharply; heating oil surged, leading the energy complex higher; precious metals were mixed, and livestock and meat futures were mixed.
In Chicago, wheat futures settled 2.5 to 4 cents higher, with the contract for delivery in December at $4.075 a bushel; corn was 0.5 cent to 2 cents higher, with December at $2.4025 a bushel; oats were 1 cent to 2 cents higher, with December at $1.4725 a bushel, and soybeans were 3.5 to 5.50 cents higher, with November at $5.8425 a bushel.
Tables begin on D6
