STOCKS : Oil, MCA Talks Help Dow Rally to Gain of 32.67
A decline in oil prices helped blue chip stocks spring back from a 14-month low Tuesday, but troubling economic news and a lack of progress in U.S. budget deficit talks limited the rise in the broader market.
The Dow Jones industrial average jumped 32.67, or 1.33%, to 2,485.64, in a reflex to the relentless selling of recent weeks.
Stocks were also buoyed by takeover talk between a major Japanese electronics firm and MCA Inc., an entertainment conglomerate and parent of one of Hollywood’s biggest movie studios, whose stock jumped 56.5% on the Big Board.
Big Board volume totaled 155.94 million shares, down from Monday’s 162.21 million. Advancing issues only slightly outpaced declining issues in nationwide trading of New York Stock Exchange-listed stocks, with 770 up, 745 down and 471 unchanged.
“It’s the sort of rally one would anticipate after the market has taken a drubbing, as it did yesterday,” said Smith Barney portfolio strategist Marshall Acuff. The Dow index fell 59.41 Monday.
The day began on a sour note when the Commerce Department reported a sharp downward revision of U.S. second-quarter gross national product to an annual rate of just 0.4% from the prior estimate of 1.2%.
Traders have long been thinking that oil prices would hurt the economy in the months ahead, so signs of relief on the oil front were warmly greeted.
Stock prices gained as oil retreated 72 cents on the New York Mercantile Exchange to close at $37.53 a barrel--its first decline since approaching a 10-year high Monday.
“Oil prices were a big boost,” said Robert Walberg, analyst at MMS International.
The first major takeover-related announcement in weeks added to the buying mood on Wall Street.
Among the market highlights:
* Japan’s Matsushita Electric Industrial Co. said it has been in talks about buying MCA, leading the stock of the entertainment group to jump 19 1/2 to 54. It was the biggest gainer and most active stock on the Big Board.
* The possibility of an MCA takeover lifted shares of other movie and entertainment stocks. Paramount Communications gained 3 1/4 to 34 7/8, Walt Disney rose 1 5/8 to 90 1/8 and Time Warner added 1 1/4 to 70 7/8.
* Elsewhere in the takeover arena, UAL Corp., parent of United Airlines, lost 3 1/4 to 89 on continued skepticism that an employee effort to buy out the airline carrier will succeed.
* Among other actively traded Big Board issues, Chase Manhattan Bank was up 7/8 at 12, General Electric gained 1 1/8 to 55 5/8 and IBM was up 1 3/8 at 106 3/8.
* Tobacco stocks were lifted by a positive ruling in a product liability lawsuit against American Brands. The company rose 1 3/4 to 68, Philip Morris rose 1 to 44 7/8 and Loews gained 1 7/8 to 87.
In foreign trading, Tokyo stocks closed down at another low for the year. The Nikkei 225-share index lost 418.51, or 1.76%, to 23,359.32 in thin trading after gaining 174.85 on Friday. Monday was a holiday in Japan.
Share prices finished higher on London’s Stock Exchange, although traders said the movement did not suggest a continuing upward trend. The Financial Times 100-share index closed up 8.9 at 1,999.2.
In Frankfurt, the 30-share DAX index plunged through the psychologically important 1,400 mark to close at its lowest level in 16 months. The DAX index closed at 1,353.40, down 62.65
CREDIT Bond Prices Rise on Bargain Hunting Bargain hunting and the decline in oil prices boosted long-term Treasury bonds, but interest rate concerns held the shorter end of the market in check.
The government’s bellwether 30-year bond was up 7/16 point, or about $4.37 per $1,000 face amount. The bond’s yield fell to 9.13% from 9.17% Monday.
Meanwhile, shorter maturities either edged lower or moved narrowly higher.
Analysts said the decline in prices brought bond buyers back into the market.
Rising oil prices, which carry the threat of higher inflation, have hurt bond prices since the Aug. 2 Iraqi invasion of Kuwait. On Monday, the 30-year bond fell about $6.25 as oil prices climbed to nearly $39 a barrel.
Many traders picking up bonds Tuesday were looking for bargains, analysts said. Treasury issues have fallen so far that they are becoming more attractive to traders looking for a good buy.
The federal funds rate, the interest banks charge one another for overnight loans, was quoted at 8.25%, up from 8.188% late Monday.
CURRENCY Dollar Ends Higher on Mideast Worries The dollar closed mostly higher, benefiting from jitters over the Mideast conflict and traders’ belief that the Federal Reserve will hold off on lowering interest rates.
“The market was very choppy. Currencies moved quickly and unexpectedly. The dollar had a fine day,” said Bob Hatcher, a dealer for Barclays Bank in New York.
The dollar finished at 1.5725 German marks, up from Monday’s finish of 1.5595. It fell to 136.70 Japanese yen, however, down from 137.35. The British pound fell to $1.8680, down from Monday’s close of $1.8815.
The dollar eased at the opening of New York trading, hurt by the downward revision of the U.S. second-quarter gross national product.
COMMODITIES Gold Futures Defy Drop in Oil Prices Prices of gold futures held nearly steady despite the drop in energy prices and similar reversals in other markets that usually are regarded as signposts for the precious metals.
On other commodity markets, livestock and meat futures were mostly lower, and grains and soybeans were mixed.
Gold futures settled 50 to 70 cents lower on New York’s Commodity Exchange, with the contract for delivery in September at $402.40 an ounce.
