CRISIS IN THE PERSIAN GULF : Stocks Rebound in Nervous Trading; Dow Jumps 24.26
Storm-tossed world markets calmed further Wednesday but showed some signs of nervousness that the continuing military buildup on the Saudi-Kuwaiti border might erupt into fighting that could set off new price gyrations.
U.S. stocks rebounded, tacking 24.26 points onto the Dow Jones industrial index, while London, Tokyo and most other markets advanced. But though bargain hunters bought up high-quality U.S. stocks, volume was sharply lower than in recent days, and some observers maintained that many investors were simply waiting out the latest events.
“This is a market of headlines, and the next piece of news could knock it 100 points up or 100 points down,” said Dan Williams, a trader at Dillon, Read & Co. in New York. The Dow’s rebound, to 2,734.90, was largely a technical reaction to four days of heavy selling, he said, “not a sign that the market’s blown off the uneasiness.”
In other markets:
* Oil prices dropped sharply on news that Venezuela and Saudi Arabia would increase production to make up for the loss in Kuwaiti and Iraqi crude. In New York trading, futures contracts for September crude ended at $25.96 a barrel, off $2.35 from Tuesday.
* U.S. Treasury bonds were mixed, though the Treasury’s quarterly auction of 10-year notes produced a striking absence of bidders because of nervousness about the Persian Gulf situation.
* The dollar, boosted in recent days by investors seeking a safe haven, gained again against European currencies but lost ground against the Japanese yen.
* Gold fell. In New York trading, the contract for August delivery slipped $1.30 to $383.20 an ounce.
* Tokyo stocks, which had lost 11.5% in value since July 31, rebounded 854 points, or 3.1%, on the Nikkei index. Most smaller Asian markets also rebounded. In London trading, the Financial Times stock exchange 100-share index gained 0.08%. But in Frankfurt, West Germany, the DAX index tumbled 46.67 points, or 2.6%, on new Mideast concerns.
In New York trading, the Standard & Poor’s 500-stock index rose 3.52 to 338.35, or 1.1%. Smaller stocks continued to rebound even faster. The NASDAQ over-the-counter composite index gained 1.4%, rising 5.65 to 407.73.
But the broad market rebound came on New York Stock Exchange volume of 190.40 million shares, compared to 231.58 million on Tuesday--marking the first day since the Kuwait invasion that volume hadn’t crossed the 200-million share mark.
Still, for the day, 1,015 issues gained and 601 retreated.
Gene Jay Seagle, market strategist with Gruntal & Co. in New York, said the 10% drop in stocks between July 14 and Tuesday’s close was a larger-than-usual price correction since the beginning of the 1982 bull market, suggesting a further bounce may be ahead. Such falls have usually been 5% to 7%, he said.
Seagle also pointed to the findings of the Investors Intelligence weekly market report, showing 45.6% of investment advisers now bearish, up 6 percentage points from last week’s report.
Such signs of prevailing bearishness suggest the market may be in for an upswing, said Seagle. He believes that the Dow will remain between 2,700 and 2,800 for the next several sessions.
But other analysts caution that if the economy is heading into recession, bargain hunting now could prove far too early.
Market highlights:
* Oil stocks retreated broadly. Exxon fell 1 5/8 to 51 3/4, Chevron tumbled 1 3/4 to 76 7/8, Unocal lost 1 1/8 to 32 and Arco eased 5/8 to 135 3/4. Among oil-service stocks, Baker Hughes gave up 5/8 to 32 1/4 and Schlumberger slipped 3/8 to 66. But McDermott rose 1 1/8 to 32.
* Drug, food and consumer products stocks continued to rise as investors sought recession-proof stocks. Procter & Gamble jumped 2 3/4 to 80, Merck rose 2 1/8 to 85 1/8, Lilly soared 2 5/8 to 78 3/8, Coca Cola gained 1 5/8 to 44 and Colgate rose 2 1/4 to 67 3/8.
* Many retailers, battered in recent days on worries about consumer spending, were picked up by bargain hunters. Gainers included Home Depot, up 1 3/8 to 34 3/4, Gap, up 2 3/4 to 53 3/4, and Woolworth, up 1 1/2 to 28 7/8.
* Tech stocks led the small-stock rebound, and software stocks were particularly strong. Microsoft jumped 2 1/4 to 63 1/2 and Oracle rose 1 1/8 to 16. Also, AST Research rose 1 1/8 to 20 and Sun Microsystems gained 1 5/8 to 30 1/4.
* UAL rocketed 13 1/2 to 114 1/2 on expectations that the company’s board would extend the deadline for employees to complete their proposed buyout. After the close, the board set an Oct. 9 deadline.
* CBS jumped 6 3/4 to 176 on new rumors that Disney may bid for the firm. Disney rose 4 5/8 to 108, as growth stocks in general rebounded. Waste Management rose 1 1/2 to 39 1/8, Circus Circus gained 2 5/8 to 55 3/4 and Amgen rose 2 1/4 to 82 1/2.
* Some financial stocks continued to rebound. Coast Savings soared 1/2 to 3 7/8, Wells Fargo rose 2 to 63 7/8 and Imperial Bancorp gained 3/4 to 14 1/4.
* Defense stocks were mixed again, as investors tried to sort out what the Mideast conflict will mean longer-term for the firms. Lockheed jumped 1 1/2 to 30 1/4 and McDonnell Douglas added 5/8 to 43, but Northrop slipped 1/8 to 15 1/4.
* Unitrin jumped 1 5/8 to 30 3/4 after the insurer set a 5-million-share buyback.
