FINANCIAL MARKETS : STOCKS : Dow Sputters to a Small Gain Late in Session
Stocks shrugged off bearish news Wednesday on interest rates and fought back to score small gains at the close.
The Federal Reserve’s so-called Beige Book of regional economic conditions said the economy continues to grow slowly with little change in inflation trends.
The report was seen as another clue that Fed interest rate policy is on hold for now, dashing hopes of lower rates. The news kept the Dow Jones industrial average down slightly for most of the day.
But the Dow recovered late to close up 1.74 at 2,895.30. Most broader indexes also gained. The Standard & Poor’s 500 index rose 0.63 to 359.10, and the NASDAQ over-the-counter composite rose 0.27 to 460.80.
One of the strongest indexes was the NASDAQ industrial index, which is heavy with high-tech companies. It added 1.23 to 493.47, showing investors continue to be interested in smaller tech stocks.
Traders said that selling after the Fed’s report lacked conviction and that volume was light. Still, declining issues outnumbered gainers by about 7 to 6 in nationwide trading of New York Stock Exchange-listed stocks, with 668 up, 777 down and 555 unchanged.
Big Board volume came to 137.42 million shares, up from 134.93 million Tuesday.
Drug stocks rose, which some traders said reflected investors’ desire to buy stocks where earnings are likely to be strong even if the economy slips. Schering-Plough rose 1 to 46 after the firm reaffirmed expectations that 1990 earnings per share will increase 18% to 20%. Upjohn rose 2 1/8 to 42 1/8; Abbott Labs added 1 to 40.
Syncor International of Chatsworth rose 3/8 to 9 5/8 after signing a pact to distribute one of Squibb’s radioactive drugs that is used in diagnostics.
Newport Pharmaceuticals of Laguna Hills plunged 5/8 to 3, after rising 13/16 Tuesday on speculation about one of the company’s AIDS treatment drugs. Federal regulators have been skeptical about the drug.
Oil and oil services stocks were mostly higher despite another fall in oil prices. Arco rose 1 1/8 to 117 7/8, Texaco added 3/4 to 58, Unocal rose 3/8 to 28 5/8 and Baker Hughes rose 1/4 to 28 3/8. But Dekalb Energy slumped 2 3/4 to 23 1/4.
Among growth stocks, Circus Circus added 1 1/8 to 61 7/8 on the strength of its opening of the Excalibur hotel in Las Vegas. Elsewhere, restaurant chain Showbiz/Pizza Time plunged 3 1/2 to 22 1/4 after an analyst lowered current-quarter earnings estimates, though the analyst said he expected good growth in the next two quarters.
In Tokyo, stocks closed slightly higher in thin trading. The 225-share Nikkei index closed 47.38 points higher at 32,087.76.
In London, stocks inched up. The Financial Times 100-share index rose 1.5 to close at 2,371.2. In Frankfurt, the 30-share DAX index closed up 12.81 at 1,849.55, continuing Tuesday’s rebound.
CREDIT Beige Book Report Sinks Bond Prices Treasury bond prices sank as the Federal Reserve’s Beige Book report on the economy reinforced a belief that the central bank won’t lower interest rates soon.
In the junk bond market, prices of RJR Nabisco bonds closed sharply higher in heavy trading as Kohlberg Kravis Roberts & Co. announced plans to retire a large part of $6 billion in debt used to finance its record buyout of RJR.
Some RJR bonds jumped on the KKR news. The 14.07% bonds due in 2009 gained more than $6 per $100 in face value to $96.75.
The Treasury’s benchmark 30-year bond fell 13/32 point, or $4.06 per $1,000 face amount. Its yield rose to 8.51% from 8.47% Tuesday.
Besides the Fed report, T-bonds were pushed lower by concerns about a possible oversupply of bonds. The Treasury said it plans to sell $11.25 billion in two-year notes and $8.25 billion in four-year notes next week. The amount of the two-year notes was $250 million greater than anticipated, fueling concerns about whether the market can absorb the supply.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.25%, up from 8.125% Tuesday.
CURRENCY Gorbachev Speech Boosts the Dollar The dollar gained slightly against most other major currencies in light trading, boosted by concern about political uncertainty in the Soviet Union, traders said.
Gold prices rose domestically after a mixed performance overseas. On New York’s Commodity Exchange, gold rose $1.40 an ounce to $350.50. Later, Republic National Bank in New York reported a bid of $349.60 an ounce.
The dollar was helped by a comment from Soviet President Mikhail S. Gorbachev that soon he might no longer be leader of the Communist Party, traders said.
At a party meeting in Moscow, Gorbachev acknowledged that he could lose his party post at a national congress in less than two weeks. The news caused a flight to the dollar in the currency markets, typical in times of uncertainty, said Andrew Hodge, analyst at Bank Brussels Lambert in New York.
The dollar inched up to 153.93 yen in New York, from 153.49 Tuesday.
COMMODITIES Crude Oil Futures Continue to Slump Prices of energy futures were mixed in trading on the New York Mercantile Exchange as crude oil futures continued their plunge in a market plagued by oversupply.
On other markets, grain and soybean prices were mixed, precious metals were higher, copper declined and livestock and pork futures were mixed.
Heavy selling of the expiring July contract for West Texas Intermediate, the benchmark grade of crude oil, weighed on the energy market, analysts said.
West Texas Intermediate crude settled 35 cents lower to 14 cents higher, with the July contract at $15.30 a barrel; heating oil was 0.03 to 0.21 cent higher, with July at 47.64 cents a gallon.
The decline in crude prices came in the wake of American Petroleum Institute figures showing that U.S. crude inventories last week declined by 1.2 million barrels to 384.4 million. Despite the decline, crude stocks remain 44.3 million barrels above last year’s level, analysts said.
“There is too much pumped crude for the refineries to handle,” said James Fiedler, an analyst with E. D. & F. Man International Futures Inc. in New York.
There was some uncertainty in the market because of a shake-up in the Kuwaiti government. Longtime oil minister Sheik Ali al Khalifa al Sabah was removed, and speculation centered on whether his successor will push more strongly for OPEC to cut production and raise oil prices.
Tables begin on D7.
FED REPORT RELEASED
The central bank reinforced a belief that interest rates won’t be lowered soon. D6
