FINANCIAL MARKETS : STOCKS : Dow Up Again; Investors Gain in Confidence
Stock prices chalked up additional gains Tuesday amid improved investor confidence due to the market’s strong performance in the aftermath of a rout in Tokyo.
The Dow Jones index of 30 industrials, which jumped 38.29 points on Monday, added another 14.64 to close at 2,617.12.
In the broader market, advancing issues outnumbered declining ones, with 927 up, 558 down and 496 unchanged in New York Stock Exchange trading. Big Board volume rose to 152.59 million shares, up slightly from Monday’s 148.91 million.
Spirits on Wall Street had gotten a lift from the market’s ability on Monday to cope calmly with Tokyo’s troubles. Confidence was bolstered again Tuesday as the market managed to maintain its upward momentum.
Tokyo’s partial recovery Tuesday also reassured U.S. investors.
On Monday, the Nikkei 225-share index fell 1,569.10 points, second only to the 3,836.48-point plunge on Oct. 20, 1987. On Tuesday, the Nikkei recovered 576.08 points to close at 33,897.95.
Hildegarde Zagorski, a market analyst at Prudential-Bache Securities Inc., said stocks were ripe for a rebound, having been sold heavily before this week.
“I think what we’re seeing here is a technical rebound,” she said, noting that investors still are nervous about the consequences that sluggish economic growth could have on corporate profits.
Investors, meanwhile, were reluctant to read too much significance into a tumble in orders to U.S. factories for durable goods. Stocks barely budged in response to the government report, market watchers said.
The Commerce Department said orders for durable goods fell a record 10.5% in January, compared to economists’ prior estimates of a 3.4% decline. It was the biggest decline since orders first were tracked 32 years ago. The decline was largely caused by a drop in orders for aircraft, cars and other transportation equipment.
American Express led the Big Board’s list of actively traded stocks, slumping 5/8 to 28 1/8 as more than 3.4 million shares changed hands. The selloff came after news that American Express will pump an additional $750 million into its Shearson Lehman Hutton Holdings unit after making a $250-million infusion in December.
Pfizer regained 3 1/8 to 59 1/8 after running up losses Monday as a Congressional subcommittee began hearings on defective heart valves formerly manufactured by the company’s Shiley unit. Securities analysts noted that the panel didn’t recommend a criminal investigation into Shiley.
Among the active blue chips, International Business Machines lost 1/4 to 103 3/4, General Motors moved ahead by 1/2 to 45, American Telephone & Telegraph added 1/2 to 39 5/8, General Electric was up 3/4 at 62 and Philip Morris fell 1/8 to 37 5/8.
AMR, parent of American Airlines, gained altitude due to a favorable assessment by a Wall Street analyst. It rose 1 to 59 1/2. Among other airline stocks, UAL, owner of United, jumped 2 to 128 1/2.
Several retail stocks had a strong day. Wal-Mart, which reported a 32% surge in fourth-quarter income, jumped 1 3/8 to 43 1/4. Woolworth, which posted a 22% pickup in its fourth-quarter profit, rose 3/4 to 59 3/8.
Shares on London’s Stock Exchange finished a confident session slightly higher, calmed by relative stability in overseas equity markets. At London’s close, the Financial Times 100-share index was 5.5 points higher at 2,254.8.
CREDIT Momentum Pushes Bond Prices Higher Bond prices rose, boosted by momentum from gains a day earlier, a continued strong dollar and the weak durable goods report.
The Treasury’s closely watched 30-year bond jumped 1/2 point, or $5 for every $1,000 in face value. Its yield, which declines when the bond’s price rises, tumbled to 8.44% from 8.48% late Monday.
Analysts said the bond market’s optimistic mood of Monday persisted as the stock market chalked up additional gains and the dollar continued to advance against the Japanese yen.
A strong dollar tends to bolster dollar-denominated securities such as Treasury bonds and notes.
The stock gains bolstered the sentiment that U.S. interest rates could ease in the near future.
In addition, analysts said, bond prices got a lift from the plunge in durable goods orders. The data, suggesting economic weakness, reinforced expectations that domestic interest rates could decline.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.25%, unchanged from late Monday.
CURRENCY Dollar Again Hits High Against Yen The dollar rose against the Japanese yen, reaching an eight-month high despite intervention by central banks, while closing mixed against other currencies.
Thomas Palladino, a trader with Amsterdam Rotterdam Bank in New York, said the Federal Reserve sold dollars in New York in an attempt to drive down the currency’s value against the yen when the dollar reached the 148.80 to 148.85 yen level.
He said the intervention appeared to have little effect.
Earlier, the Bank of Japan tried to stem the dollar’s rise against the yen in the Tokyo market.
The dollar rose Tuesday to 148.73 yen in late trading in New York. The dollar has not closed that high against the yen since June 15, when it reached 151.30 yen.
Traders said U.S. currency softened a bit in the morning after the Commerce Department released the durable goods report. But the dollar soon regained its strength, Palladino said.
“It really was a nothing trading day,” said Bob Morrissey, a trader for Bank of Boston.
In Tokyo, the dollar rose to a closing 149.03 yen from 148.65 yen at Monday’s close. Later, in London, it slipped to 148.57 yen.
The dollar was mixed against the British pound. In London, the pound traded at $1.6915 late Tuesday, cheaper than $1.6927 late Monday. In New York, the pound cost $1.6908, more than the $1.6903 of late Monday.
Gold prices fell. Republic National Bank of New York quoted a bid for gold at $408.25 an ounce as of 4 p.m. EST, down 25 cents from late Monday.
On New York’s Commodity Exchange, gold for current delivery dropped 70 cents an ounce to $408.
Earlier, gold traded in London at a late bid price of $407.25 an ounce, down from $411.75 bid late Monday. In Zurich, the bid price was $411.25, unchanged from late Monday. In Hong Kong, gold fell $4.30 to close at a bid $407.85.
COMMODITIES Gasoline Prices Fall on Bearish Signals Gasoline futures prices were pummeled on the New York Mercantile Exchange in a selloff linked to perceptions of ample near-term supplies and strongly bearish chart signals.
Other petroleum futures also retreated.
On other commodity markets, silver futures led the precious metals lower; pork bellies were down the daily limit; cattle futures advanced, and grains and soybeans were mixed.
Unleaded gasoline futures settled 0.80 cent to 2.27 cents lower, with the contract for delivery in March down 2.27 cents at 57.56 cents a gallon.
West Texas Intermediate crude oil finished 18 to 41 cents lower, with April at $21.58 a barrel; heating oil was 0.06 to 0.89 cent lower, with March at 58.16 cents a gallon.
Energy futures were weak for much of the session amid perceptions of ample supplies of gasoline along the Gulf Coast and in the New York harbor, analysts said.
Further selling stemmed from expectations the American Petroleum Institute would show a substantial increase in U.S. inventories of gasoline for the seventh week in a row, and from position-evening ahead of the expiration Wednesday of the March petroleum contracts.
But the heaviest selling occurred late in the session after the March gasoline contract dropped below 59 cents a gallon, triggering waves of sell orders based purely on chart signals.
“When it got pushed down to the point where the technicals kicked in, then it was just a blood bath,” said Jerry Samuels, an analyst with Shearson Lehman Hutton Inc. in New York.
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