STOCKS : Market Goes on Wild Ride; Dow Gains 3.96
The stock market chalked up scattered gains after a roller-coaster session Tuesday that saw the Dow Jones industrial index slide as much as 34 points before rebounding smartly in late trading.
The Dow, which was off more than 20 points at 2 p.m. on Wall Street, closed up 3.96 points at 2,571.29. It briefly sported a double-digit gain in the last hour of a volatile session.
Broader market measures finished mixed, however. Declining issues outnumbered advancing ones by more than 4 to 3 in New York Stock Exchange trading, with 626 up, 854 down and 501 unchanged.
Big Board volume expanded to 141.13 million shares from 110.60 million Monday. It was the highest daily total since 160.15 million on Aug. 27.
After days of waiting for any positive news, investors eagerly seized on word that U.S. budget negotiators are still attempting to reach an accord as quickly as possible. “The market found some things to hang its hat on,” said Tom Gallagher, head of Oppenheimer & Co.’s block trading.
In addition, an unexpected drop in the closely watched federal funds rate fueled speculation that the Federal Reserve may be working to lower interest rates.
While analysts viewed the drop in the fed funds rate as technical, they noted that even the suggestion that rates may be going down temporarily seemed enough to spur some buying of stocks.
“That’s what stimulated stocks, but that was an ill-founded rally,” said Alfred Goldman, technical analyst at A. G. Edwards & Sons, who noted that blue chips retreated from their best levels.
Stocks had opened weak after news that the July trade deficit soared to $9.33 billion, up 75% from June. Rising crude oil prices and jitters over the Persian Gulf crisis also weighed on the stock market.
Among market highlights:
* Despite the sudden optimism about interest rates, worries about the financial system showed in the active stocks. Federal National Mortgage lost 1 5/8 to 27 3/8 after Chairman DavidMaxwell confirmed that he will retire in January. He has been responsible for the company’s turnaround. Elsewhere, Primerica, a Dow component stock, tumbled 2 5/8 to 23 1/8. Investors appeared worried about the company’s consumer finance operations, in light of the economy.
Among banks, Chase Manhattan slumped 7/8 to 15 on worries that it could be facing trouble raising funds because of its weak financial position. Other bank losers included Wells Fargo, off 1/2 to 54; First Chicago, off 1/4 to 20 3/8, and NCNB, down 1 1/4 to 28.
* UAL Corp. jumped 7 5/8 to 105 on hopes that a deal for the airline company is still viable.A union group is pursuing a buyout proposal for the company at a lower price.
* Strong blue chips in the late rally included Philip Morris, up 1/4 to 45 1/8; IBM, up 2 1/8 to 107 1/4; 3M Co., up 7/8 to 79; GM, ahead 5/8 to 37 3/4, and AT&T;, up 3/8 to 31 1/8.
* Microsoft rose 1 to 61 3/4, continuing recent strength. Shearson Lehman reiterated a buy rating on the stock.
* Among Southland engineering stocks, Jacobs Engineering jumped 3/4 to 20 1/2, while Fluor dropped 1 to 34 1/4. There was no news.
* Oil stocks continued to churn. Mobil added 1/2 to 67 and Arco gained 5/8 to 142 1/4, but Royal Dutch lost 1/2 to 82 3/8 and Occidental fell 1/2 to 22 3/4.
In Tokyo, stocks closed sharply down but above the day’s lows, depressed by higher oil prices and concerns over climbing interest rates. The Nikkei 225-share index ended down 480.78 points, or 2%, at 23,884.82.
In London, shares also fell, with the Financial Times 100-share index closing down 30.3 points at 2,064.0., a new low for the year.
West German stocks sagged as foreign investors accelerated the market’s downtrend. The 30-share DAX ended 33.88 points down at 1,507.27, also a new 1990 low.
CREDIT Government Bond Prices Hold Steady Government bond prices closed virtually unchanged as the market digested the disappointing reports on inflation and trade, good news on oil prices and a rumor that the Federal Reserve was easing interest rates.
The Treasury’s benchmark 30-year bond closed at 96 25/32, unchanged from late Monday. Its yield remained at 9.06%.
Bond prices plunged in the morning after the Labor Department released the consumer price report and the Commerce Department announced a widening of the nation’s trade deficit.
But then bonds began to rise on a rumor that the Fed was adding reserves to the banking system to ease interest rates.
The rumor was prompted by the drop in the federal funds rate, the interest banks charge each other on overnight loans, to as low as 6.25% from 7.938% late Monday. Late in the afternoon, the federal funds rate was quoted at 7.5%.
Though traders generally felt that the drop was technical, some suggested that the Fed could be signaling a desire to bring rates down to help ailing banks and the economy in general.
CURRENCY Dollar Rebounds From Early Fall The dollar rebounded on domestic markets after falling in response to the disappointing U.S. trade report.
Robert Hatcher, a foreign exchange dealer at Barclays Bank PLC in New York, said the dollar was supported in part by rumors that negotiators in Washington are nearing an agreement to reduce the federal budget deficit by $50 billion.
The dollar closed at 1.552 German marks, up from 1.548 on Monday, and at 137.90 Japanese yen, up sharply from 136.55.
The dollar was little changed against the British pound, which found support from rising oil prices because Britain is a net exporter of oil. The pound ended at $1.913, down from $1.914 on Monday.
COMMODITIES Copper Prices Down as Rally Hopes Fail Copper futures prices fell sharply on New York’s Commodity Exchange after an expected rally linked to the expiration of copper options in London failed to occur.
Copper futures settled 2.35 to 3.95 cents lower in Chicago, with the contract for delivery in September at $1.30 a pound.
The September contract traded as low as $1.282 a pound during the session, following a sharp decline on the London Metal Exchange that analysts attributed to disappointed selling by traders who had expected strong gains.
Elsewhere, near-term crude oil futures ended modestly lower on the New York Mercantile Exchange while contracts for deferred deliveries rose. The pattern was similar in the gasoline market, but heating oil futures advanced strongly.
Light sweet crude oil futures for October fell 22 cents to $33.41 a barrel, after soaring $1.87 Monday. But longer-term contracts rose as much as 53 cents a barrel.
Market Roundup, D8
