FINANCIAL MARKETS : STOCKS : Dow Jumps 41.83 on Dollar, Oil Price Gains
Stocks raced to their biggest gains in six weeks Wednesday, with blue chips ending just below their all-time closing high.
A late burst of computer-driven buy programs, a firmer dollar and a surge in oil prices all contributed to snap the market out of its recent doldrums, analysts said.
The Dow Jones index of 30 industrials, which had fallen 23.27 points on Tuesday, climbed 41.83 points (1.4%) to 2,932.67, its highest close since the record 2,935.89 on June 15.
The gain in the 30-share index was the largest one-day point rise since May 29, when it rose 49.57.
In the broader market, advancing issues outnumbered declines by almost 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 971 up, 506 down and 521 unchanged. Big Board volume hit 162.2 million shares, up from Tuesday’s 147.6 million.
“I think the rebound in bonds and the dollar and the strength in foreign markets all played a part,” said Phil Roth, chief technical analyst at Dean Witter.
“If there’s any reason why stocks are going up, it may be that people are impressed that the market has held together so well,” said analyst Hugh Johnson at First Albany Corp.
Also, a rise in oil prices--on the belief that OPEC may act to curb oversupply--boosted oil stocks and provided strength.
Exxon rose 1 1/8 to 47 7/8; Chevron gained 1 5/8 to 71; Atlantic Richfield jumped 2 1/8 to 117 5/8; Unocal rose 1 1/2 to 27 3/4; Baker Hughes climbed 1 3/8 to 27 3/4, and Halliburton was up 1 3/4 to 47 3/4.
Drug and consumer-oriented stocks also chalked up big gains as investors continued to seek out companies with consistent earnings growth prospects and minimal exposure to recession risk. Philip Morris gained 1 1/8 to 49 1/4; Abbott Labs added 1 to 43 3/4; Gillette rose 2 1/4 to 63 1/4, and Disney jumped 3 1/4 to 134 1/2.
Other highlights:
* Good earnings news sent Anthem Electronics up 1 1/8 to 33 3/8; home siding firm AMRE, up 1 3/8 to 6; and Safeway, up 1/2 to 16 5/8.
* Hilton Hotels fell on lower-than-expected earnings. The stock slipped 1 3/8 to 51 5/8. Golden Nugget, meanwhile, jumped 3 1/8 to 37 1/8 on expectations that its new Mirage casino in Las Vegas is gaining at Hilton’s expense.
* Oracle Systems fell 2 1/2 to 19 7/8. The software company posted an earnings gain for the May quarter, but it was below expectations.
* Many small growth stocks continued to be standout performers as they have for several months. Conner Peripherals rose 1 to 27 3/4; Optical Radiation rose 2 to 35 1/4; Tokos Medical added 3/4 to 15 1/4, and Synetic jumped 2 3/4 to 20 1/2.
* Moorpark-based computer maker Tandon was the biggest percentage gainer in the over-the-counter market, rising 11/16 to 3 13/16, a 22% gain. The stock has been very volatile of late.
In Tokyo, stock prices rebounded in slow trading, supported by the yen’s sharp rise. The Nikkei 225-share index rose 141.75 points to close at 32,294.18.
In London, prices soared, boosted by a weaker pound and a strong performance on Wall Street. The Financial Times-Stock Exchange 100-share index rose 33 points, or 1.4%, to close at 2,360.5. In Frankfurt, West Germany, the DAX index advanced 8.30 points to 1,917.89 in a light session.
CREDIT
Bonds Inch Up After Treasury Auction Bond prices broke a four-day losing streak, hanging on to post tiny gains after an auction of seven-year Treasury notes.
The Treasury’s key 30-year bond rose 1/32 point, or about 30 cents for every $1,000 face amount. Its yield, which falls when prices rise, slipped to 8.56% from 8.57% late Tuesday.
Prices finished below their highs of the day, losing ground in the wake of the auction of $8 billion in seven-year Treasury notes.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.313%, unchanged from Tuesday.
CURRENCY
Profit Taking Gives the Dollar a Boost
The dollar rebounded modestly, but foreign exchange dealers predicted that the U.S. currency would resume its downward course soon.
The dollar picked up more than 2 cents against the British pound and more than 1 pfennig against the West German mark in New York trading. Dealers attributed Wednesday’s gains to profit taking as traders sold other currencies that have soared in recent weeks against the dollar.
Dealers cautioned that despite the dollar’s better showing it was still fundamentally weak against the yen, while high interest rates are still shoring up European currencies including the pound.
They said the pound should remain firm because of the government-imposed 15% base interest rate on bank lending to curb inflation. The high rate continues to attract money to London.
The pound has also advanced sharply against other currencies on speculation Britain will soon enter the Exchange Rate Mechanism of the European Monetary System, designed to curb exchange rate fluctuations.
Karen Gibbs, senior futures analyst with Dean Witter Reynolds Inc. in Chicago, said the markets were awaiting Friday’s expected release of British inflation figures. If the numbers show an acceleration of inflation, the Thatcher government is expected to nudge interest rates even higher and boost the pound in the process.
COMMODITIES
OPEC Session Sends Oil Prices Climbing
Crude oil prices rose sharply for a third consecutive day Wednesday on an industry inventory report and on belief that OPEC will restrain production soon.
The benchmark West Texas Intermediate crude for August delivery shot up 53 cents on the New York Mercantile Exchange to end the day at $17.47 a barrel, $1 higher than its close Friday.
The oil industry’s American Petroleum Institute had reported after the market close Tuesday that U.S. crude oil stocks last week dropped 3.7 million barrels, the largest decline in months.
A communique from a meeting of oil ministers of five Persian Gulf states also provided indications that Saudi Arabia and Iraq may have succeeded in convincing Kuwait and the United Arab Emirates to give up demands for higher OPEC output quotas.
On other commodity markets, copper futures leaped to their highest levels in two months amid heavy buying by West German interests and renewed supply concerns; precious metals were mixed; grains and soybeans retreated.
Copper futures settled 2.9 to 5.75 cents higher in New York, with the contract for delivery in July at $1.2435 a pound--highest since May 11.
Prices shot up from the opening bell in reaction to a sharp increase in copper prices on the London Metal Exchange that analysts attributed to strong buying from West Germany. Market rumors linked the buying to a West German firm said to be part of a consortium trying to buy a large state-owned copper mine in Cananea, Mexico.
But a Mexican court blocked the transaction, citing a law forbidding foreign ownership of natural resources, according to the rumors.
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