STOCKS : Oil Price Drop Helps Give Dow 23-Point Boost
Stocks rose Friday, but oil prices retreated as relative quiet in the Middle East encouraged energy traders to take profits.
The Dow Jones industrial index rose 23.26 points to close at 2,619.55. In the broader market, advancing shares outpaced declines 904 to 544 on the New York Stock Exchange, where volume was a light 124.3 million shares. For the week, the widely watched Dow index rose 5.19.
Volume for the week was the slowest in nearly two years on the Big Board, with just 463 million shares changing hands.
In addition to falling oil prices, traders took comfort from statements by President Bush and House Majority Leader Richard Gephardt (D-Mo.), who both expressed optimism that negotiators could reach an agreement on trimming the federal deficit this weekend.
Weaker-than-expected August employment figures had an early dampening effect on Treasury bonds, which spilled over into Wall Street, but the effect was short-lived.
The U.S. unemployment rate rose to a two-year high of 5.6% in August from 5.5% in July. But bond traders focused on an upward revision in July payrolls, signaling surprising economic strength.
Stocks’ minor rally did little to relieve the overall bearish mood. “I think the market is primed to continue its downward trend within the next week or so,” said A. G. Edwards technical research director Alfred Goldman.
“We’re in a bear market, and until the issues of a recession and how we get out of it are resolved, it will be hard to get bullish,” another analyst said.
Among the market highlights:
* IBM led the Dow higher, jumping 3 1/8 to 105 1/2 on optimism about its new mainframe computers. Other tech stocks were mixed. Software firm Oracle slumped 1 3/4 to 8 1/8 after it said it expects a loss for the quarter just ended of about 20 cents a share because revenue rose only 30% in the period, versus a goal of 50%. The company also cut its estimate for fiscal 1991 revenue growth in half, to 25%.
* Some beaten-down consumer stocks rebounded, including McDonald’s, up 1 1/8 to 27 7/8, and Procter & Gamble, up 1 1/2 to 78. But Toys R Us lost 5/8 to 23 1/8 as one analyst cut earnings estimates, apparently on worries about weakening retail sales.
* McDonnell Douglas soared 2 1/8 to 47 5/8 on word of a major jet fighter sale to South Korea. Elsewhere in the defense sector, Teledyne gained 1 1/8 to 19 though there was no news.
* Oil stocks were mixed and mostly little changed, despite the plunge in oil prices. Arco slipped 1/4 to 138 1/2, Unocal added 1/8 to 33 3/8 and Exxon rose 1/2 to 50 7/8. Gas and gas pipeline stocks continued to be strong. Columbia Gas rose 1 to 49 1/2, Consolidated Natural Gas added 1 to 47 3/4 and Tenneco jumped 1 3/8 to 58 7/8.
* Health-care stocks were again big winners, as investors sought recession-resistant safe havens. Abbott Labs jumped 1 3/8 to 40 3/4, Warner Lambert gained 1 3/4 to 63 1/8, Humana rose 1 5/8 to 45 1/2 and Care Plus added 1/2 to 18 1/8. Fountain Valley-based FHP International was flat at 14 1/2 after reporting earnings that were on target with expectations.
In Tokyo, the key index closed firmer after a wild day. The Nikkei 225-share index, which plunged 829.30 points Wednesday and 266.43 points Thursday, rose 150.16 to 23,962.07 after falling to a new 1990 low in the morning. For the week, the Nikkei lost 7.8%.
In London, stocks staged a modest rally in late afternoon. The Financial Times 100-share index closed 2 points higher at 2,122.9, ending the week with a fall of 39.9 points, or 1.9%. In Frankfurt, German shares ended mixed. The 30-share DAX index rose 5.80 points to 1,562.92. For the week, the DAX fell 66.59 points, or 4%.
CREDIT Employment Data Helps Bond Prices Government bond prices rose as a plunge in oil prices dampened inflation fears and an employment report offered signs of a weakening economy.
The bellwether 30-year Treasury bond gained 3/8 point, or $3.75 per 1,000 face amount. Its yield declined to 8.91% from late Thursday’s 8.95%.
Prices fell in morning trading after the government released August employment data showing weakness in the labor market--but perhaps not enough to induce the Fed to try to foster an economic revival by lowering interest rates.
Scott Winningham, analyst at Stone & McCarthy Research Associates, said bond prices had been following the oil market in lock-step until focus shifted to the employment report earlier this week.
After the report was released, the focus again returned to oil, he said. “Fed policy issues apparently are on the back burner as market participants concluded they are not going to ease imminently,” Winningham said.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8%, down from 8.125% late Thursday.
COMMODITIES Supply Fears Send Copper Futures Up Copper futures prices soared more than 7 cents a pound to their highest levels in nearly a year, reflecting renewed concerns that labor and production problems will lead to further tightening of supply.
In other commodity markets, precious metals were mixed, oil futures fell sharply, grains and soybeans were lower and livestock and meat futures were mixed.
Copper futures settled 3.9 to 7.25 cents higher on New York’s Commodity Exchange, with the contract for spot delivery up 7.25 cents to $1.3545 a pound, the highest settlement of a near-term copper contract since Sept. 22, 1989.
Analysts said the surge in buying interest was prompted in part by reports of production setbacks or labor problems in a number of copper-producing countries, including Chile, Peru and Zaire.
Frederick Demler, metals analyst with PaineWebber Inc., said two key developments were the shutdown due to environmental problems of an Exxon Corp. copper smelter in Chile and the rejection of a contract offer by striking copper miners in Peru.
“There are a number of production problems around the world, and there are still relatively low worldwide inventories,” Demler said.
Tom Blaney, metals specialist with Balfour Maclaine Corp., said Friday’s stronger stock market and steep drop in oil prices bolstered confidence in the economy and contributed to copper’s gains.
Elsewhere, gold settled 20 to 30 cents lower, with September at $389.50 an ounce, and silver was 2.4 to 3 cents higher, with September at $4.80 an ounce.
Market Roundup, D6
