STOCKS : Dow Rises 13.12 as Budget Pact Appears Near
Stock prices rose modestly Wednesday on growing signs of an imminent agreement on a plan to cut the huge federal budget deficit.
The Dow Jones industrial index rose 13.12 points to close at 2,625.74. Advancing issues outnumbered declines in nationwide trading of New York Stock Exchange-listed stocks, with 778 up, 638 down and 539 unchanged.
Big Board volume rose to 129.89 million shares from Tuesday’s 113.22 million.
“There’s some hope that we’re moving closer to some positive development on the budget-deficit front,” said analyst Alan Ackerman at Gruntal & Co.
President Bush’s speech Tuesday night to Congress was interpreted by some as indicating that congressional and Administration negotiators were close to a compromise on a package that would cut the federal debt by $500 billion over five years.
“The market applauded Bush’s speech last night,” said Marshall Acuff, strategist at Smith Barney, Harris Upham. “There’s hopefulness we’ll get some sort of deal on this budget deficit.”
The market also drew some early encouragement from comments by Federal Reserve Governor Martha Seger, who said she favored easing credit.
At the end of the session, technical buying boosted the market out of the narrow range where it had languished most of the day.
The market’s ability to resist extensive negative sentiment helped bolster confidence and nudge stock prices higher, said Ralph Bloch, chief technical analyst at Raymond James.
But worries about Mideast tensions continued to weigh on stocks. Iranian leader Ayatollah Ali Khamenei said the fight against the U.S. military buildup in the Persian Gulf amounted to a holy war.
Among the market highlights:
* Metals stocks, strong lately, jumped further after Reynolds Metals said third-quarter earnings should be close to the second quarter’s results. Reynolds rose 2 3/8 to 68 3/8, Alcoa gained 2 to 68 1/4, Maxxam soared 3 3/8 to 62 and Phelps Dodge added 1 7/8 to 63 3/4.
* Oil stocks gained again. Arco jumped 2 3/8 to 138 5/8, Mobil rose 3/4 to 66, Unocal added 5/8 to 32 7/8, Texaco was up 1 3/4 to 64 3/8 and Halliburton rose 3/4 to 54 7/8.
* Corroon & Black soared in very heavy trading, adding 6 5/8 to 37 1/2. Aon Corp. proposed acquiring the insurance brokerage for $40 a share, or $840 million.
* McDonnell Douglas continued to gain strength, rising 1 1/4 to 50 7/8 after brokerage Smith Barney raised earnings estimates, citing improved prospects for the firm’s jetliner unit. Smith Barney figures that McDonnell will earn $4.25 a share in 1991, up from a previous estimate of $3.50.
* Electronics distributor Marshall Industries lost 3/8 to 21 1/2 after saying that operating earnings per share should be up 10% in the third quarter just ended.
* Amgen gained 1 7/8 to 48 after the biotech firm said it expects federal approval for its white-blood-cell-generating drug by next March.
* Collins Foods and Sizzler Restaurants both slumped as investors expressed unhappiness with Collins’ deal to sell most of its operations to Pepsico, then buy the 34% of Sizzler it doesn’t already own. Collins fell 1/2 to 17 1/4; Sizzler fell 1 1/4 to 15 1/4.
* LA Gear lost 1 1/4 to 14 1/8. A story in Wednesday’s Los Angeles Times said the firm’s new Michael Jackson shoe line has been a disappointment. Meanwhile, Nike gained 2 to 73 on expectations of strong overseas growth.
* Browning-Ferris slipped 1 1/2 to 33. Analysts at Prudential-Bache, Alex. Brown and Smith Barney cut estimates on the waste disposal firm. Waste Management also turned in a weak performance, falling 3/4 to 35 1/2.
* Toys R Us fell 5/8 to 22 3/4. Shearson lowered its 1990 and 1991 earnings estimates for the company.
Prices rebounded sharply on the Tokyo Stock Exchange, with the Nikkei 225-share index jumping 611.48 points to 25,216.14.
On the London Stock Exchange, share prices closed lower, with the Financial Times 100-share index down 2 points at 2,142.3. West German shares were quoted sharply lower right after Khamenei’s comments. But the 30-share DAX index ended up 20.92 points at 1,598.34.
CREDIT Treasury Bonds Close Slightly Lower Treasury bond prices closed unchanged to slightly lower in light trading. The benchmark 30-year bond fell 1/8 point, or $1.25 per $1,000 face amount. Its yield, which moves inversely to the price, rose to 8.94% from 8.92% late Tuesday.
Bond prices increased slightly in early trading on optimism that a budget accord was near, said Susan Hering, economist with Salomon Bros. But then Khamenei’s speech calling for a holy war against Western forces “pretty much squashed that rally,” Hering said.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 7.938%, unchanged from Tuesday.
CURRENCY Dollar Rebounds in Domestic Trading The dollar was mostly higher in New York after falling in overseas trading and reaching a 13-month low against the Japanese yen.
“There is some skepticism in the market about whether or not the (German) reunification process can be completed without any disruptions,” said Bill Janson, an analyst with Discount Corp.
That uncertainty brought the German mark lower against the dollar. The U.S. currency closed at 1.591 marks in New York, up from 1.586 Tuesday.
The possibility of interest rate changes accounted for other gains by the dollar in New York--but also attributed to its decline overseas.
The British pound rose slightly against the dollar in New York and closed at $1.8590, up from $1.8565.
Against the yen, however, the dollar fell in New York to 138.08, down from 140.30. Early Thursday in Tokyo, the dollar fell to 137.50 yen. “Investors had been buying other currencies and selling the yen to make up for losses in the Japanese stock market. Now they are reversing those trades,” said Kaoru Ito, a trader at Nippon Credit Bank.
COMMODITIES Oil Up Modestly; Corn Futures Off Crude oil and gasoline futures rose moderately, while heating oil futures ended mixed Wednesday.
Light sweet crude oil for October rose 21 cents to $30.97 on the New York Mercantile Exchange, but wholesale heating oil was 0.73 cent lower to 0.18 cent higher, with October heating oil at 82.59 cents a gallon, and unleaded gasoline was 0.23 to 0.41 cent higher, with October at 93.84 cents a gallon.
Gold futures settled $1.50 higher across the board, with September at $382.10 an ounce; silver was 2.3 to 2.4 cents higher, with September at $4.80.
Elsewhere, grain analysts predicted a sharp drop in corn futures prices ahead, after the government released a harvest projection that exceeded nearly everyone’s expectations. Corn futures posted modest losses on the Chicago Board of Trade ahead of the monthly Agriculture Department report.
In light-volume grain trading in Chicago, wheat futures settled 1 cent lower to 1/2 cent higher, with the contract for delivery in September at $2.66 3/4 a bushel; corn was 3/4 cent to 2 1/4 cents lower with September at $2.39 1/4 a bushel; oats were unchanged to 1 3/4 cents lower, with September at $1.11 1/2 a bushel, and soybeans were 1 cent to 3 cents higher, with September at $6.28 1/2 a bushel.
After the close, the USDA released a crop report estimating the 1990 U.S. corn crop at 8.12 billion bushels, up 8% from last year’s crop and 3% more than the government forecast a month ago. Analysts’ pre-report expectations averaged 7.97 billion bushels vs. last month’s USDA estimate of 7.85 billion and last year’s harvest of 7.53 billion bushels.
Market Roundup, D8
