FINANCIAL MARKETS : STOCKS : Confidence Still Low, but Dow Nudges Up 8.42
Stocks closed with small gains Wednesday, as investors cautiously moved back into the market in search of bargains in the aftermath of Monday’s violent fall.
The Dow Jones industrial index advanced 8.42 to 2,930.94. Added to Tuesday’s 17.82-point gain, the Dow has recovered nearly half of Monday’s 56-point loss.
In the broader market, advancing issues outnumbered declines by about 3-to-2 in nationwide trading of New York Stock Exchange stocks, with 895 up, 583 down and 512 unchanged. Big Board volume fell to 163.53 million shares from Tuesday’s 181.92 million.
Firm bond prices and a modest recovery in some technology issues helped lift the market, although confidence remained in short supply, traders said. “They were certainly buying some of the stocks that were beaten down Monday, but everybody’s afraid another shoe is going to drop,” said Charles Jensen of MKI Securities.
“I think it’s just been a day of continual consolidation from the big selloffs Friday and Monday,” said Ned Collins, trader at Daiwa Securities.
Weak earnings reports that led to the stock market’s recent pullback continued to be a factor. Digital Equipment reported a big loss, and its stock fell 5/8 to 74 7/8. The modest decline reflected the market’s expectation of the loss.
“The market is going to be shaky because of these earnings reports,” said David Mills, senior vice president at Boston Co. “We’re in one of these sloppy periods.”
Also undermining confidence was the nettlesome influence of computer program trading. A circuit breaker that briefly halted stock index futures trading Monday was credited with braking the market’s decline. Wednesday, Treasury Secretary Nicholas F. Brady called for immediate legislation to deal with program trading that assists speculation.
Market highlights:
* Leading the Dow higher were Alcoa, up 1 1/2 to 69 1/8; Boeing, up 1 3/8 to 58 1/4, and Union Carbide, up 3/4 to 20.
* Oil stocks, favorites Tuesday, were hit by profit taking as oil prices eased on reduced Mideast tensions. Chevron was off 1 to 77 3/4, Exxon lost 3/8 to 49 5/8, Mobil dipped 1 to 66 and Amoco fell 1 to 53 7/8. Arco, however, added 1/4 to 125 3/4.
* Among tech stocks, AST Research jumped 2 1/4 to 22 5/8 and Marshall Industries rose 1 3/4 to 27 1/2, both on strong earnings reports. Other winners included Sun Microsystems, up 1 5/8 to 33 1/2; Ashton Tate, up 1 1/8 to 10 1/2, and Amgen, up 3 to a new high of 90 1/2.
* Many growth stocks continued to rebound. Wal-Mart climbed 3/4 to 33 1/4, Dreyer’s Ice Cream jumped 1 1/4 to 42 3/4 and Circus Circus rose 1 1/4 to 68 1/4.
* L.A. Gear fell 2 1/8 to 23 in selling ascribed to a reduction in at least one analyst’s earnings estimate. The company declined to comment on current-quarter sales.
* Lockheed plunged 2 3/4 to 26 3/8 on renewed pessimism about the firm’s prospects.
In Tokyo, shares ended mixed after fluctuating in a tight range for most of the day, as fears of rising domestic interest rates and a weaker yen kept a tight lid on trading. The key 225-share Nikkei index eased 1.19 to 31,701.27.
In London, prices finished slightly higher. The Financial Times 100-share index was up 3.8 to 2,364.7. In Frankfurt, shares ended mixed. The DAX index ended 0.91 points lower at 1,920.25.
CREDIT
Durables Report Boosts Bond Prices
Bond prices recorded a moderate advance Wednesday amid optimism about interest rates and the federal budget.
The Treasury’s 30-year bond rose 7/16 point, or about $4.37 per $1,000 face amount. Its yield fell to 8.54% from 8.57% late Tuesday.
Analysts said a combination of factors boosted prices.
In early trading, bonds got a lift from the government’s report of a larger-than-expected decline in orders for durable goods. The drop, considered a sign of economic weakness, contributed to traders’ hopes that the Federal Reserve would relax its credit policy and allow interest rates to fall.
Prices were also boosted by reports that budget negotiators in Washington were close to agreeing on a package that would slash $50 billion from the fiscal 1991 deficit.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 7.938%, down from 8% Tuesday.
CURRENCY
Dollar Advances on the Yen, Pound
The dollar was mixed in foreign exchange, rising against the Japanese yen and British pound but losing ground against other key currencies.
Linda McLaughlin, a trader with Chemical New York Capital Markets Group, attributed the dollar’s movement largely to technical factors. She said the currency benefited indirectly from the yen’s weakness against the German mark.
Market-wide sentiment that the Bank of Japan won’t raise interest rates soon has pressured the yen, while the mark has been supported by comparably higher rates in West Germany, traders said.
In Tokyo, where trading begins, the dollar rose to a closing 149.13 yen from 148.70 yen at Tuesday’s close. It traded at 148.75 in London and at 148.80 yen in New York, up from 148.40 Tuesday.
The dollar was stronger against the British pound compared to Tuesday. Sterling bought $1.8125 in London, down from $1.8250, and $1.8125 in New York.
COMMODITIES
Gold Futures Jump; More Gains Seen
Prices of gold futures rose substantially on New York’s Commodity Exchange, but although the market closed well below the day’s highs, analysts said the recent rally appeared likely to continue.
On other commodity markets, other precious metals rose; copper futures advanced; energy futures fell; livestock and meat futures were higher, and grains and soybean retreated.
Gold futures settled $3.80 to $4.10 higher, with the contract for delivery in August at $372.40 an ounce and the spot July contract at $372, the highest settlement for spot gold since May 22.
The rally erased Tuesday’s moderate losses and pushed prices beyond the highs posted Monday, when August gold soared $7.70.
Elsewhere, West Texas Intermediate crude oil for September delivery fell 18 cents to $20.38 a 42-gallon barrel, as Mideast tensions eased a bit.
