STOCKS : Dow Breaks Losing Streak, Closes Up 11.94
The stock market snapped a five-day losing streak Wednesday but failed to rally with any conviction. Early strength in the bond market and news of a $2-billion merger helped pull stocks out of their slump. But volume remained weak and analysts said further declines were likely.
The Dow Jones index of 30 industrials, down 111.27 points over the last five sessions, rose 11.94 to 2,666.44.
Advancing issues outnumbered declines in nationwide trading of New York Stock Exchange-listed stocks, with 774 up, 664 down and 536 unchanged. Big Board volume came to 133.48 million shares, against Tuesday’s 137.36 million.
“The fact that we’ve rallied one day does not indicate by any means we have secured a bottom,” one analyst said.
Norton Co., which has been trying to thwart a $75-a-share hostile takeover bid from Britain’s BTR PLC, announced a friendly merger at $90 a share, or $1.9 billion, with Compagnie de Saint-Gobain, a French glass maker.
The Norton news “was a tonic for the market,” said Oppenheimer & Co. analyst Michael Metz. He said the deal shows that there are “some striking values” in U.S. companies.
“There hasn’t been a meaningful-sized transaction in quite a while,” added Ed Laux, a trader at Kidder, Peabody & Co.
An early rebound in bond prices provided some support for stocks. But by the close bonds slid lower, though the losses were mild.
“Earlier in the day, we had a pretty positive bond market, and there has been some buying from an oversold short-term condition,” said Tom Callahan, executive vice president at Yamaichi International. “But I just see a lack of activity (in stocks).”
USX rose 1 1/4 to 34. Financier Carl Icahn, a major stockholder in the company, said enterprises that he heads would buy $800 million more worth of shares if a proposal to split up USX’s steel and energy businesses takes effect.
Network Equipment Technologies plunged 6 7/8 to 9 1/4. The company reported sharply lower earnings for its latest fiscal quarter and restated its profits for the two previous quarters downward after an internal investigation.
MCA, a strong stock of late, rose another 1 1/2 to 57. Vons rose 3/4 to 23 3/8, continuing to surge on news of a first-quarter profit. Thinly traded Craig Corp. added 1/2 to 18.
In foreign trading, prices on the Tokyo Stock Exchange closed slightly higher in relatively active trading. The blue-chip Nikkei 225-share index, which declined 177.69 points Tuesday, recovered 62.98 points to close at 29,564.36.
In Frankfurt, the DAX index rebounded 12.78 points to 1,843.31. In London, stocks closed lower after the government reported a larger trade deficit for March. The Financial Times 100-share index lost 16.8 points to 2,143.1.
CREDIT Bonds Decline Over Inflation Concerns Bond prices finished lower after an early rally, dampened by disappointing results from a government auction and persistent fears of inflation.
The Treasury’s closely watched 30-year bond lost 1/4 point, or $2.50 for every $1,000 in face value. Its yield, which rises when prices decline, advanced to 8.98% from 8.95% late Tuesday.
Analysts said bond prices were hurt by results from the Treasury’s auction Wednesday of two-year notes, in which yields rose to the highest level in a year.
“The results of the two-year (auction) weren’t hot,” said Mitchell Held, economist at Smith Barney, Harris Upham & Co.
In addition, Held said, the bond market now has what he called a “general fear” prompted by signs of increasing inflation, a stronger economy and worries about upcoming bond auctions.
Higher inflation and an economic upturn could prompt the Federal Reserve to keep interest rates high. Higher rates erode the value of fixed-return investments such as bonds.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.188%, unchanged from Tuesday.
CURRENCY West German Mark Takes Sharp Rise The dollar fell against most major currencies in light trading as the Swiss franc and the West German mark rose sharply.
Traders said the Swiss franc was boosted by the Swiss central bank’s decision Tuesday to raise interest rates. That caused the dollar to lose strength against the currency, said Lorenzo Troni, vice president of foreign exchange at PaineWebber International Inc.
The mark strengthened against the dollar on the belief that the West German central bank will raise its official interest rate shortly to help stem inflation, Troni said. Higher West German rates make returns on the mark relatively more attractive as an investment.
Linda McLaughlin, a currency trader with Chemical Bank, said the dollar lost value due to technical factors, with little economic news to affect the currency. She described the trading as light.
In late London trading, the dollar was quoted at 1.6820 marks, down from 1.6930 marks late Tuesday. It stood at 1.6780 marks late in New York.
The dollar fetched 1.4665 Swiss francs in London, down from 1.4865 late Tuesday. Later, in New York, the dollar traded at 1.4575 Swiss francs.
Earlier in Tokyo, the dollar rose 1.10 yen to a closing 159.25 yen. In London, it was quoted late Wednesday at 158.59 yen. In New York, the dollar finished at 158.73.
The pound sank in London following the British announcement that the merchandise trade deficit widened in March to 2.18 billion pounds from February’s 1.39 billion pounds. However, the currency later finished stronger on buying by the Bank of England.
Sterling finished the day in London at $1.6370 compared to $1.6345 Tuesday. Later in New York, the pound rose to $1.6405 from $1.6347 on Tuesday.
COMMODITIES Platinum Collapse Hurts Metal Futures Precious metal futures prices plunged as a supply-connected collapse of platinum prices triggered selling in the gold and silver markets, which had already been weakened by a lack of investor demand.
Gold for spot delivery traded as low as $370 an ounce for the first time since April 2, and silver plummeted to its lowest level in nearly four years.
On other commodity markets, copper futures surged to an eight-month high; oil futures were sharply lower; grains and soybeans retreated, and livestock and meat futures were mixed.
Gold futures settled $5.20 to $5.70 lower on New York’s Commodity Exchange, with the contract for delivery in April at $370.70 an ounce.
