FINANCIAL MARKETS : STOCKS : Dow Ends Its Three-Day Fall, Climbs 32.92
Stock prices snapped back from a three-day slide Friday on rumors that Iraq may be considering a pullout from Kuwait, falling oil prices and rallying Treasury bonds.
Short covering also helped fuel the rebound, as traders who had correctly forecast stocks’ drop covered their positions.
The Dow Jones industrial index jumped 32.92 points, or about 1.4%, to end the week at 2,398.02, cutting its loss for the week to 112.62 points.
Advancing issues outnumbered declines in nationwide trading of New York Stock Exchange-listed stocks, with 917 issues rising, 640 declining and 432 unchanged. Big Board volume rose to 187.49 million shares, up from 180.06 million in the previous session.
Several reports suggesting that Iraq may consider withdrawing from Kuwait resulted in oil prices falling 73 cents a barrel to close at $39.69 on the New York Mercantile Exchange, which boosted stock and bond prices.
A Kurdish rebel group said Friday that Iraqi President Saddam Hussein was consulting members of his ruling Baath Party on whether to withdraw from Kuwait. A British television report also suggested that Saddam may be considering withdrawal.
“It’s a news market,” said Jack Solomon, technical analyst at Bear, Stearns & Co. “We’re responsive to any rumors and news.”
Sid Dorr, head trader at Charles Schwab & Co., said gains in the bond market were a major impetus for Wall Street’s rally. “There’s enough real cash out there that investors will keep finding value.”
Financial markets showed little reaction to a surprisingly brisk 1.6% rise in September producer prices. “Because of (higher) energy costs, people were just expecting bad numbers,” said Jay McElroy at 1838 Investment Advisors.
Among market highlights:
* Earnings worries continued to hit many stocks. Shares of Chemical Banking continued to decline, losing 5/8 to 12 5/8, one day after the bank slashed its dividend. Other bank issues turned in a mixed showing. J.P. Morgan rose 1 3/8 to 33 1/2, and BankAmerica gained 1/2 to 18 3/8, but Manufacturers Hanover dropped 3/4 to 19 1/4 and Security Pacific eased 1/4 to 19 5/8.
* Deere slipped 7/8 to 40. Prudential-Bache cut its 1990 and 1991 earnings estimates, based on declining sales. Alcoa dropped 1 to 53 1/2 on its earnings report.
* Shares of Octel Communications dropped 2 1/8 to 8. Analysts lowered earnings estimates on the company, which reported disappointing first-quarter profit.
* Many battered growth stocks rebounded. Merck added 2 to 77 1/4, Pepsico gained 1 1/8 to 23 3/4, Boeing rose 1 1/2 to 44 1/2 and Teradata jumped 7/8 to 10 3/8.
* MCA jumped 4 to 57 7/8. Sources familiar with talks between the company and Matsushita said the two firms have signed a confidentiality agreement allowing MCA to provide Matsushita with detailed financial information.
* In the computer sector, third-quarter results of Intel Corp. came within the range of Wall Street expectations, and its stock gained 7/8 to 30. But Compaq dropped 2 1/4 to 36 3/4. Kidder Peabody again said a new laptop computer would fall short of Wall Street expectations on price and availability.
* Some retailers snapped back, though much of the gains smacked of short-covering rather than real buying. J.C. Penney added 1 5/8 to 39 3/4, Sears rose 1/2 to 23, Gap jumped 4 1/4 to 45 3/8, Woolworth rose 1 3/4 to 26 1/4 and Wet Seal jumped 1 1/8 to 11 7/8.
* Mattel rose just 1/4 to 16 1/8 despite forecasting third-quarter earnings of about 88 cents a share, up 18%.
In Tokyo, stocks closed lower after a day of moderate trading in which potential buyers were largely sidelined by higher oil prices and losses on Wall Street. The key 225-share Nikkei index finished with a loss of 195.47 points at 22,390.16.
German share prices surged in active trading on a flood of buying from domestic and British investors. The 30-share DAX index ended up 31.32 points at 1,459.70, gaining 67.94 points over the week.
Share prices also closed lower on London’s Stock Exchange after fluctuating narrowly in thin trading. The Financial Times 100-share index closed down 1.8 points at 2,100.4.
CREDIT
Bond Prices Jump Almost $11 Higher The main U.S. Treasury bond soared nearly $11 on the report that Iraq was considering withdrawing from Kuwait.
The government’s benchmark 30-year bond gained 1 3/32 point, or $10.94 per $1,000 in face amount, regaining all of a $9 drop Thursday. Its yield, which falls when prices rise, sank to 8.95% from 9.06% late Thursday.
However, junk bond prices continued to plummet, traders said, showing that the market was increasingly concerned about a severe recession ahead. The market was unnerved by a new bond default by Bally’s Grand on its 11.5% first-mortgage bonds. Some junk bonds sank as much 10 points on the news.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 7.875%, unchanged from late Thursday.
CURRENCY
Dollar Ends Mixed in Nervous Trading The U.S. dollar finished mixed in a world market that traders said was influenced by a myriad of factors, from uncertainty in federal budget negotiations to the falling oil prices.
“This is just a very volatile market,” said Lloyd G. Atkinson, chief economist with the Bank of Montreal.
Atkinson said foreign traders were shocked at developments in Washington, where budget negotiators have been unable to agree.
The dollar settled at 129.05 Japanese yen, down from 129.47 on Thursday. In Tokyo, the dollar fell 0.65 yen to close at 129.30 yen. Later, in London, it fell to 128.65 yen.
The German mark also gained against the dollar, rising to 1.5243 marks from 1.5138 Thursday.
In New York, one British pound fetched $1.9675, down from Thursday’s $1.9775. But in London, the pound rose to $1.9740 from $1.9640 late Thursday.
COMMODITIES
Silver Prices Rise; Oil Futures Mixed Silver prices rose Friday after hitting a new 14-year low that some analysts said might have marked the bottom of a dramatic slide.
On other commodity markets, gold futures advanced, orange juice collapsed, petroleum futures were mixed, grains and soybeans retreated and livestock and meat futures advanced.
Silver settled 7 to 7.1 cents higher on New York’s Commodity Exchange, with the contract for spot delivery up 7.1 cents at $4.306 an ounce.
Gold ended $2.20 to $2.30 higher, with spot October at $387.50 an ounce.
Market Roundup, D6
