STOCKS : Surge in Oil Prices Sends Dow Down 20
Rumors of a Mideast war Thursday drove oil prices up by more than $3 a barrel, overriding Wall Street’s relief over a budget compromise in Washington.
The Dow Jones industrial index sank 20.05 points to close at 2,484.16, joined in its fall by the broader market, which had been going its own way in recent days.
On the New York Stock Exchange, declining issues outnumbered advances by about 4 to 3, with 624 up, 851 down and 487 unchanged. Big Board volume came to 141.46 million shares, against 149.29 million Wednesday.
The oil-sensitive Dow Jones index of transportation stocks fell sharply, down 15.72 points or 1.8%, to 851.33. Higher oil prices are bad news for transportation firms.
Analysts said stocks were buffeted by a rumor in the morning, later denied, that President Bush had given Iraq an ultimatum to get out of Kuwait. Near the close, rumors that the United States had actually invaded Kuwait sent stocks into another tailspin.
“There were all kinds of rumors,” said one trader, “plus oil was up three bucks.” Crude oil for December delivery rose $3.17 to $34.25 a barrel on the New York Mercantile Exchange.
The near-completion of a federal budget package after five months of wrangling gave shares an early lift. Barring unexpected glitches, the deficit-reduction plan should be passed by Saturday night.
Among the market highlights:
* Higher oil prices--and awful profit reports--combined to send airline stocks tumbling. Delta fell 3 1/8 to 58 5/8 after it reported a first-quarter loss of $1.27 a share. USAir dropped 5/8 to 16 after reporting a quarterly loss as well. Meanwhile, Federal Express fell 1 to 34 5/8 and HAL, parent of Hawaiian Air, tumbled 2 to 8 5/8.
Also, UAL stock dropped 7/8 to 96, partly on news that AMR, the parent of American Airlines, had offered to outbid UAL’s $400-million deal for Pan Am’s core London routes. AMR fell 1 to 46 3/4.
* MCA rose 7 to 57, recovering from a selloff Wednesday on concern that takeover talks with Matsushita Electric were stalled. Matsushita said the talks are progressing.
* Among financial stocks, Coast Savings rose 1/2 to 3 1/8 after it announced it will omit its dividend. The news was expected. But S&L; and bank stocks in general continued to drop. Manufacturers Havover tumbled 1 1/2 to 20, First Interstate fell 1 to 19 1/2 and BankAmerica slipped 1/4 to 19 7/8.
* Unisys lost 1/8 to 3 3/8. The company released a raft of bad news, including a $357-million loss for the third quarter. Among other technology stocks, Bell Industries fell 1 to 13 1/2 on disappointment over an 8% quarterly profit gain.
* Tiffany slumped 2 1/4 to 31 1/8. The company said its domestic sales are slowing because of an “extremely cautious consumer.”
* Among consumer stocks, Quaker Oats gained 1 1/2 to 48 1/4. Traders cited Goldman Sachs’ decision to add the stock to its recommended list. In the drug sector, most stocks were lower, but Agouron Pharmaceuticals of La Jolla rose 1 1/4 to 6 1/2.
* Oil stocks were mostly higher, but Tenneco fell 3 1/4 to 41 1/4 after it reported surprisingly weak third-quarter profits. Transco Energy dropped 2 7/8 to 39 7/8 after it delayed third-quarter results.
Prices rebounded sharply on the Tokyo Stock Exchange, recouping the previous day’s losses in a resumption of a rally that started almost two weeks ago. The Nikkei index of 225 selected issues, which shed 421.42 points Wednesday, jumped 475.75 points to 25,352.63.
In London, a late drop alongside Wall Street weakness pushed stocks down nervously in a market already depressed by high oil prices and lower corporate profits. The Financial Times 100-share index closed down 21.8 points at 2,088.7.
German share prices ended mixed in thin, cautious trading after Wednesday’s turbulent session sent many participants to the sidelines. The 30-share DAX index closed up 3.76 points at 1,497.58.
CREDIT: Bond Prices Rise on Budget News The near-completion of the budget-reduction package helped bond prices advance moderately in light trading.
The price of the Treasury’s bellwether 30-year bond rose 9/32 point, or about $2.81 per $1,000 in face amount. Its yield, which falls when the price rises, slipped to 8.75% from 8.77% late Wednesday.
Bond investors were heartened by the budget news because it could open the door for lower interest rates. The Federal Reserve has made passage of an agreement a prerequisite for an easing of its credit policy.
Analysts said bond prices also got a boost from a Labor Department report that initial claims for state unemployment insurance rose 26,000 on a seasonal basis in the week ended Oct. 13. The news indicated a further weakening of the economy.
The federal funds rate, the interest on overnight loans between banks, traded at 8%, up from 7.875% late Wednesday.
CURRENCY: Dollar Makes Up Some Lost Ground The dollar rebounded on world currency markets to recoup steep losses posted Wednesday.
As the session unfolded, a flurry of rumors about U.S. military intentions in the Persian Gulf swept the market. The rumors encouraged investors to seek a safe haven in the dollar--the currency of choice in times of turmoil.
“It was a stop-and-go market,” said Bob Morrissey, trader at the Bank of Boston. “There were constant rumors.”
The dollar was also supported by the budget agreement. “The market is saying that it has a little more faith in the whole process, in the validity of the budget,” said Zlatko Glamuzina, chief dealer at Banco di Sicilia.
In New York, the dollar settled at 128.25 yen, up from 126.49 on Wednesday. Against the German mark the dollar rose to 1.518 from Wednesday’s 1.506. The British pound fell to $1.950 from $1.959 late Wednesday.
COMMODITIES: Gold Futures Rise; Silver Prices Drop Gold prices continued to climb as the resurgent oil market fanned inflation fears. But platinum prices dropped sharply, reflecting declining Japanese investor interest and worldwide economic jitters.
On other commodity markets, grain and soybean futures retreated, and livestock was mixed.
Gold futures settled $2.30 to $2.40 higher on New York’s Commodity Exchange, with the contract for spot delivery at $375.80 an ounce. The increase marked gold’s sixth advance in the last seven sessions. It plunged to a three-month low of $360 on Oct. 16.
Silver futures settled 1.9 to 2 cents lower, with the spot price at $4.20 an ounce.
