STOCKS : Dow Up 33.78 on Strength of Tech Issues
Strong results from the Treasury Department’s auction of 10-year notes sparked a rally on Wall Street on Wednesday that propelled blue chip issues sharply higher.
The Dow Jones index of 30 industrials jumped 33.78 points to close at 2,640.09.
Advancing issues overpowered losers in nationwide trading of New York Stock Exchange-listed stocks, with 941 issues up, 567 down and 443 unchanged.
Big Board volume surged to 186.71 million shares from Tuesday’s 134.07 million.
Stocks began the day sharply lower, stifled by worries about the quarterly Treasury auction. However, buoyancy in technology issues, led by IBM, helped nudge the market to higher ground by mid-session.
“The rally really started out in the technology sector,” said Marshall Acuff, investment strategist at Smith Barney. “IBM refused to give ground in a weak market.”
IBM rose 2 1/4 to close at 103 1/4.
Acuff said the strength in technology stocks carried over to the energy area. “The two groups carried the day,” he said.
After gains in those sectors set the stage for a rally, results of the Treasury auction provided the fuel.
“It looks like the refunding is going well,” said Brad Weeks, head of equity trading for Donaldson, Lufkin & Jenrette. “Reports are the Japanese bought about 25% to 30% of the notes.”
The three-part $30-billion auction, which started Tuesday with the sale of $10 billion in three-year notes, ends today with the auction of $10 billion in 30-year Treasury bonds.
Worries about the refunding have depressed stock prices in recent sessions. In particular, investors were concerned that yields would be forced higher to compete against overseas rates and attract Japanese investors. Foreign investors, particularly the Japanese, are an important source of funds into U.S. credit markets.
Despite the rally, some Wall Street analysts said underlying market fundamentals remained bearish and predicted a continued short-term downtrend in the market once the refunding is over.
“The real problems are floundering profits and rising interest rates, which are deadly for the stock market,” said Larry Wachtel, equities analyst with Prudential-Bache Securities Inc.
“When the refunding is out of the way then the problems will reoccur,” Weeks said. “People will start talking of poor corporate earnings again and about what might happen in the first quarter--and the market will go down again.”
Among actively traded issues on the NYSE, Haliburton rose 3 to 45 3/8, AT&T; gained 1/2 to 40 and General Electric added 5/8 to 62 5/8.
Among other computer stocks, Compaq Computer rose 4 3/4 to 86 1/8, Digital Equipment advanced 1 7/8 to 79 1/8 and Hewlett-Packard increased 2 3/8 to 47 5/8.
In Tokyo, market uncertainties and recycled rumors kept investors on the sidelines, and shares closed sharply lower. The 225-share Nikkei index tumbled 364.96 points to 37,301.87.
Prices also fell in a roller-coaster session on London’s Stock Exchange on uncertainty over the outcome of the ongoing U.S. Treasury auctions. At the London closing, the Financial Times 100-share index was down 13.7 points at 2,307.4.
CREDIT Bond Prices Jump in Heavy Trading Bond prices rose as the second leg of the government’s quarterly refunding auction was greeted with enthusiasm.
The Treasury’s benchmark 30-year bond gained 17/32 point, or $5.31 per $1,000 face amount. Its yield fell to 8.54% from 8.58% late Tuesday.
The bond market had been concerned about Wednesday’s auction because of doubts over participation by Japanese investors, who typically buy large amounts of U.S. government securities.
But domestic buying was heavy and the yield on the notes was 8.59%, up from 7.94% at the last auction on Nov. 13. The yield was the highest since last May, but analysts said a positive sign was that it did not have to move even higher to attract buyers.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.188%, unchanged from late Tuesday.
CURRENCY Dollar Gains in Late Recovery The dollar rose in light New York trading, after earlier hitting a two-year low against a surging West German mark in European trading.
Gold prices declined in U.S. dealings but moved mostly higher abroad.
On the Commodity Exchange in New York, gold bullion for current delivery settled at $418.10 an ounce, $3.20 lower than Tuesday’s close. Republic National Bank in New York quoted gold bullion at $418.10 as of 4 p.m. EST, down $2.60 from Tuesday’s late bid.
The dollar has been playing a supporting role to the mark lately because reforms in the Soviet Union and Eastern Europe are expected to benefit the West German economy, said Keith Raphael, second vice president of foreign exchange at Chase Manhattan Bank.
Dealers said developments in Moscow, with Soviet Communist Party leaders agreeing to give up their monopoly on power as proposed by President Mikhail S. Gorbachev, already had been factored into foreign exchange markets.
The dollar began its trading day in Tokyo by rising to 145.10 Japanese yen from 144.90 yen at Tuesday’s close. Later in London, it rose to 145.45 yen. At the end of New York’s trading day, the dollar was quoted at 145.60 yen, up from 145.245 yen Tuesday.
The dollar ended the day in New York at 1.6580 West German marks, up from 1.65605 marks on Tuesday and from the 1.6545 closing level Wednesday in Europe. In London, the British pound fell to $1.6995 from $1.7015 late Tuesday and to $1.6960 from $1.7030 in New York.
COMMODITIES Bullish Indications Lift Soybean Prices Soybean futures prices rose moderately on the Chicago Board of Trade amid signs of stronger demand and drier growing conditions for the South American crop. Most grain futures also advanced.
On other commodity markets energy futures were mixed, and livestock and meat futures were mostly higher.
Soybean futures settled 3.5 to 5 cents higher, with the contract for delivery in March up 5 cents at $5.6775 a bushel.
Wheat futures settled 0.5 cent lower to 1.75 cents higher, with March at $3.83 a bushel; corn futures were 1.25 to 1.65 cents higher, with March at $2.39 a bushel, and oats were 1.25 to 1.75 cents higher, with March at $1.3725 a bushel.
