STOCKS : Market Goes on Wild Ride; Dow Dips 6.19
Stock prices took another roller-coaster ride Friday, recovering from steep losses caused by worries over the federal budget crisis and worse-than-expected unemployment figures to end only slightly lower.
The Dow Jones industrial index closed down 6.19 points at 2,510.64. In the first 20 minutes of the session, the Dow fell by more than 51 points, forcing the New York Stock Exchange to limit computerized program trading for fear of a steeper slide.
Declining issues outnumbered advances by about three to two in nationwide trading of NYSE-listed stocks, with 598 up, 893 down and 464 unchanged. Big Board volume totaled 153.38 million shares, against Thursday’s 145.41 million.
The market was boosted in midafternoon by a jump in London stock prices, which reacted favorably to Britain’s decision after months of debate to link its currency with other currencies in the European Community. London’s Financial Times 100-share index closed up 3.6%, or 73.5 points, to 2,144.
But before the boost from Britain, stocks in New York were badly battered.
Financial markets had hoped that Congress would pass the sweeping agreement reached last weekend to cut the U.S. budget deficit by $500 billion over five years, but the House voted the agreement down early Friday.
A cut in the budget deficit is considered a condition for the Federal Reserve to ease interest rates.
The market was also depressed by a dose of weak economic news: The Labor Department reported that the unemployment rate rose to 5.7% in September from 5.6% in August. The September rate was the highest in nearly 2 1/2 years.
American shares of British companies were among the day’s strongest performers, boosted by the London rally.
Among other market highlights:
* Travelers Corp. plunged 4 1/2 to 16 1/4 after the insurance company said it will reduce its quarterly dividend 33%, citing real estate investment problems. The news shocked the market, and dragged other insurance stocks down, including Aetna, off 3 7/8 to 33 1/2, Unum, off 3 3/4 to 35 7/8, Cigna, down 2 3/4 to 36 1/8 and Chubb, off 1 3/4 to 36 3/4.
* Some S&Ls; and banks dropped on the Travelers news. Wells Fargo lost 1 to 46, Coast Savings eased 1/4 to 2 3/4 and Downey Savings gave up 1/2 to 11 5/8. But a few battered banks closed higher, including Chase, up 7/8 to 12 3/4.
* MCA closed off 1 3/4 at 61 as some investors lost patience with merger talks between the company and Matsushita.
* Some buyers snapped up defense stocks in a flurry of activity. General Dynamics jumped 2 1/8 to 25 1/2, McDonnell Douglas rose 1 1/8 to 48 5/8, Lockheed gained 1 3/8 to 27 7/8 and United Technologies added 1 5/8 to 46 1/2.
* Bargain-hunters chased some high-tech stocks, including Bell Industries, up 1 5/8 to 15 3/4, Teradata, up 1/2 to 11, and Software Toolworks, up 1/2 to 5 1/8.
In Tokyo, the Nikkei-225 index closed up 549.46 points, or 2.5%, at 22,827.65. In Frankfurt, Germany, the DAX index lost 30.59 points, or 2.2%, to 1,391.76.
ENERGY
Oil Prices Jump as Jitters Resume Oil prices moved higher after renewed nervousness over the Persian Gulf prompted traders to bid up the market.
Crude oil for delivery in November on the New York Mercantile Exchange closed $1.06 higher at $37.99 a barrel.
“Prices are still high because no one wants to be short going into the weekend with tension in the gulf still high,” said a London trader. When short, a trader has a commitment to provide oil he does not own. If prices rise, the short-seller stands to post big losses.
CURRENCY
Dollar Declines as Pound Soars The British pound rocketed higher after Britain announced that it will link its currency as part of the European Monetary System on Monday, ending long opposition to the idea and months of market speculation.
The dollar fell against the Japanese yen on the negative U.S. jobs numbers and the rejection Thursday by the House of the budget agreement.
Subdued activity quickly erupted into chaos, and the British pound zoomed ahead in New York to close at $1.952 late in the session, up from $1.914 late Thursday.
The dollar closed at 1.548 German marks, compared to 1.534 Thursday, and at 132.20 yen, down from 133.83.
CREDIT
Bond Prices Steady in Erratic Trading Bond prices finished little changed after a volatile session in which failure to reach a federal budget accord overshadowed another rise in unemployment.
The Treasury’s benchmark 30-year bond ended the day largely unchanged, recovering from a sharp decline earlier in the day that pushed prices down about $6 per $1,000 face amount. The bond’s yield dipped to 8.78% from 8.79% late Thursday.
Bond traders said the rejection of the federal budget deficit accord made it unlikely that the Federal Reserve would take quick action to lower interest rates to spur the slumping economy, which would boost the value of fixed-income instruments such as bonds.
The federal funds rate, the rate banks charge each other on overnight loans, was quoted at 7.938%, down from 8.188% Thursday.
COMMODITIES
Pork Futures Rise to Near-Record High Pork belly futures prices aimed for near-record prices on the Chicago Mercantile Exchange as a perceived shortage on the market had traders fearing that supplies would run out before next summer.
Frozen pork bellies settled 0.37 cent to the trading limit of 2 cents higher, with the contract for delivery in February at 66.45 cents a pound.
On other commodity markets, livestock futures were mixed; soybeans were mixed, wheat gained and corn was lower, and precious metals were mixed.
Gold rose and silver fell in light trading on the New York Comex. Gold settled $1.20 to $1.30 higher, with October at $393.60 an ounce. Silver settled 0.2 to 0.1 cent lower, with October at $4.67.
