Blue Chips Bounce Back; Dow Up 14.87 in Volatile Session
Wall Street blue chips staged a limited comeback Tuesday after sliding 77 points the day before, but the broader market failed to follow despite some futures-related buying and a sprinkling of better corporate earnings reports.
The Dow Jones average of 30 industrials rose 14.87 to 2,615.32 after a 77-point drop Monday. The widely followed barometer fluctuated in a 55-point range Tuesday and gave up ground in the last few minutes of trading.
Declining issues outnumbered advancers by a margin of about 5 to 4 in nationwide trading of New York Stock Exchange-listed stocks, with 666 stocks rising, 864 down and 468 unchanged.
Big Board volume rose to 179.30 million shares, up from Monday’s 148.38 million.
The key 30-share index had a roller-coaster ride early in the day. After rising 20 points shortly after the opening, it dropped eight points below what some analysts see as a critical support level at 2,600 before recovering around midday.
While good results from several companies, including American Brands, Merck & Co. and General Electric provided relief in an otherwise bleak corporate picture, the overriding market sentiment remained bearish.
Market watchers said the pessimism about interest rates and corporate profits that dragged stocks lower on Monday persisted Tuesday, although the blue chip issues managed to attract some buyers.
“Investors and speculators don’t have the courage to buy secondary stocks,” said Michael Metz, an analyst with Oppenheimer & Co., who described the market as “a combination of those looking for an exit and those looking for bargains.”
Merck rose 1 to 71 7/8 and General Electric was down 1/8 to 62 3/4 after the companies announced fourth-quarter earnings that were in line with Wall Street’s expectations.
Hilton Hotels plunged 8 3/4 to 65 1/2 after the company said it was considering alternatives to a sale of the firm. Hilton had been thinking of a sale since last summer.
Among blue chip issues, AT&T; was up 1/4 to 40 3/4 and IBM was up 1/8 to 96 3/4.
Bank of New England, which recently said it expects an annual loss of about $1.05 billion, was the NYSE’s most active issue, falling 1/2 to 3 1/4, with 4.3 million shares changing hands.
Shares of Campbell Soup rose 1 1/2 to 48 1/2 on renewed takeover speculation sparked by reports that two Dorrance family members holding 7% of the company’s stock said they would not oppose consideration of a sale or merger.
Stock prices rose for the third straight day on the Tokyo Stock Exchange. The key Nikkei 225-share average, which soared 420.47 Monday, added 121.01 to close at 37,378.02.
In London, shares finished lower after a choppy session. At the close of trading, the Financial Times 100-share index was down 6.0 points at 2,291.1.
CREDIT U.S. Auction Results Hurt Bond Prices Bond prices tumbled, reflecting disappointment with the results of a $5-billion auction of 40-year bonds being sold to finance the government’s thrift bailout.
More than half of the day’s decline in prices came after the late-afternoon announcement of the auction results.
The news touched off a burst of selling, as analysts said many traders viewed the auction as an ominous sign in view of impending government sales next month of as much as $30 billion in new debt securities.
The Treasury’s benchmark 30-year bond lost nearly a full point, or $10 for every $1,000 in face amount. The bond had been down only about $3 for every $1,000 in face value at midday.
The 30-year bond’s yield climbed to 8.39% from 8.30% late Monday.
The early decline in bond prices was attributed to weakness in the dollar Tuesday and renewed concern about inflation--sparked by a sharp increase in gold prices in morning trading.
But trading activity was fairly light in the early going as traders awaited the outcome of the Resolution Funding Corp.’s auction of $5 billion in 40-year bonds.
The bonds sold at prices to yield an average of 8.60%, but some of the bids that were accepted ranged as high as 8.65%.
Steven A. Wood, economist for BankAmerica Capital Markets Group in San Francisco, said the announcement triggered “a very hectic flurry of activity” which saw interest rates on the 30-year Treasury bonds jump more than 5 basis points in about 30 minutes.
“That’s a sizable move for such a short time,” he said.
The federal funds rate, the interest rate banks charge each other for overnight loans, was unchanged from Monday at 8.125%.
CURRENCY Calm in East Bloc Bearish for Dollar The dollar lost value against all major foreign currencies Tuesday and finished near its lowest levels of the day in U.S. trading.
Reports that the unrest was subsiding in Soviet Azerbaijan halted the dollar’s recent advance and renewed buying of West German marks. Investor confidence in the dollar also was shaky in the aftermath of Monday’s sharp selloff on Wall Street.
Robert Morrissey, a currency trader at Bank of Boston, said the recent political turmoil in Eastern Europe and the Soviet Union had spurred dollar demand and caused dealers to lighten their holdings of marks.
But sentiment turned against the dollar again Tuesday and interest resurfaced in marks. Sales of dollars pushed the U.S. currency past technical support levels and caused additional sales amid trading maneuvers intended to prevent further losses.
The dollar dropped in Tokyo to 146.33 Japanese yen from 146.42 yen Monday. Later, in London, it fell to 146.03 yen and in New York, the dollar was quoted at 145.94 yen, down from 146.50 yen late Monday.
In London, the British pound rose to $1.6480 from $1.6385. In later New York trading, sterling strengthened further to $1.6535 from $1.6370.
COMMODITIES Gold Futures Rise on Investor Jitters Gold futures prices climbed sharply on New York’s Commodity Exchange, erasing substantial losses posted in the three previous sessions as investors spooked by the stock market sought safer havens for their money.
On other commodity markets, oil futures finished mostly lower; grains and soybeans were mixed; and livestock and meat futures were mixed.
Gold futures settled $5.70 to $6.60 higher, with the contract for delivery in February up $5.70 at $413.70 an ounce. Silver futures finished 2.5 to 2.9 cents higher, with March at $5.34 an ounce.
February gold had fallen a total of $5.70 since last Wednesday. The tumble appeared to have halted Monday when the contract fell during the session to $404.70, representing a loss of $6.30, then bounced back to finish only $2.90 lower.
THE DOW IN 1990: A ROCKY START
Daily close, Dow Jones index of 30 industrial stocks. ALL-TIME HIGH: 2,810.15 on Jan. 2. Tuesday close: 2,615.32, up 14.87. / Los Angeles Times
