Dow Ends Month on a High Note, Rebounding 47.30
The stock market rebounded smartly Wednesday from a string of recent losses, giving the market a boost at the end of a dismal January.
The Dow Jones index of 30 industrials rose 47.30 points to close at 2,590.54. It was the strongest gain since Jan. 2, when the 30-share index jumped nearly 57 points to close at an all-time high of 2,810.15.
Since then, the market has fared poorly. As of Tuesday’s close, the Dow had lost about 267 points, or nearly 10% of its value, since the record was set. And the January selloff came in a month that has historically seen rallies.
Advancing issues outpaced decliners by a margin of about 5 to 2 in nationwide trading of New York Stock Exchange-listed stocks, with 1,116 issues up, 449 down and 411 unchanged.
Big Board volume totaled 189.66 million shares, up from 186.03 million on Tuesday.
Stocks rallied at the opening on what some Wall Street analysts called a technical bounce amid oversold conditions, then moved steadily higher throughout the session. It was the first gain in five sessions for the Dow industrials, which had fallen more than 72 points since last Wednesday.
“I don’t think this is the start of an up trend. This is properly termed a technical bounce,” said Hugh Johnson, senior vice president at First Albany Corp.
Wall Street analysts said the catalyst for the rally was the bond market’s strength despite an unexpected 0.8% rise in the December index of leading indicators. Consensus expectations were for a rise of about 0.5%.
The index, composed of 11 statistics designed to forecast economic activity six to nine months into the future, was the latest indication that the economy, while weak, can avoid an actual decline in growth--or recession.
Theodore Tung, senior vice president with National City Corp. in Cleveland, said interest rate worries, which have plagued the market in recent days, have now been discounted in the market.
“As interest rate concerns subside, stocks are doing better,” Tung said. “It’s all keyed to interest rates.”
Analysts said reports that Mikhail S. Gorbachev had denied he might resign as Soviet Communist Party chief eased market jitters early in the day. The television report Tuesday jolted the financial markets and sent the dollar soaring.
Takeover-related issues that revived Wednesday included Hilton Hotels, which closed up 4 at 61 3/4; Holiday Corp., up 1 5/8 to 59 5/8; Lin Broadcasting, which added 5 1/8 to 105 1/2, and Sea Containers, ahead 2 5/8 to 60.
Stocks closed slightly lower in Tokyo after a session of choppy up-and-down trading in light volume. The Nikkei 225-share index closed down 26.72 at 37,188.95.
Prices advanced on the London Stock Exchange after cautious interest from institutional investors boosted certain stocks. At the close, the Financial Times 100-share index was up 15.3 at 2,337.3.
CREDIT Bond Prices Post Impressive Gains Bond prices rallied with some government issues posting their largest gains in nearly three months.
The Treasury’s benchmark 30-year bond rose 31/32 point, or $9.69 per $1,000 face amount, while its yield plunged to 8.45% from 8.55% late Tuesday.
Analysts said it was the largest gain since the widely watched long bond gained a full point last Nov. 7.
“It really looks like all of a sudden we’ve almost had a complete change of sentiment,” said Steven A. Wood, an economist at BankAmerica Capital Markets Group in San Francisco.
Reports that President Bush would propose troop cuts in Western Europe in his State of the Union address Wednesday night generated optimism because such a move could contribute to lowering the budget deficit.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.25%, unchanged from late Tuesday.
CURRENCY Dollar Falls After Rumors Discounted The dollar slipped against most key currencies in thin trading after the markets discounted a report that Gorbachev would resign.
The dollar closed mixed against other major currencies in European trading, affected by uncertainty over Soviet politics, Japanese central bank intervention and domestic inflation.
Foreign exchange dealers said traders sold dollars after they discounted the report about Gorbachev.
In Tokyo, the dollar closed at 144.40 Japanese yen, up from 143.25 on Tuesday. In London late Wednesday the dollar closed higher at 144.45 yen. In New York it closed at 144.45 yen, down from 144.65 yen late Tuesday.
In London, one British pound cost $1.6870 late Wednesday, more expensive for buyers than Tuesday’s late $1.6830. Later, in New York, it sold for $1.6792, up from $1.6725 Tuesday.
COMMODITIES Gold Plan Reports Send Prices Falling Gold futures prices tumbled amid reports that the United States has asked the International Monetary Fund to consider using its gold holdings to wipe out past-due loans to some of its member countries.
Traders feared that such a plan could lead to sales of several million ounces of gold on the open market.
On other commodity markets, oil futures were mixed, livestock and meat futures were lower and grains and soybeans were mixed.
Gold futures settled $5.70 to $6.40 lower on New York’s Commodity Exchange, with the contract for delivery in February off $5.70 at $412.40 an ounce.
The first report about the IMF said the United States had proposed the 152-nation lending agency sell $4 billion worth of gold to obtain cash needed to offset about $4 billion in delinquent loans to 15 of its poorer members.
That report prompted heavy selling of gold futures, analysts said.
A Treasury Department source told the Associated Press that the actual proposal was that the IMF “consider mobilizing” a portion of the IMF gold holdings contributed by the delinquent members, amounting to less than 3%--or about $1.23 billion--of the 103 million ounces held by the IMF.
The source, who requested anonymity, would not elaborate on what “mobilizing” meant.
