STOCKS : Market Rallies in Late Trading; Dow Gains 5.94
Renewed Middle East jitters sent stocks cascading lower in morning trading Monday, but a bounce in the bond market and a late halt to an oil-price rally helped shares end mixed.
Investors were rattled by news that Washington is seeking an authorization of force from the United Nations if Iraq does not withdraw from Kuwait by Jan. 1.
The Dow Jones industrial index tumbled as much as 31 points, but then rallied to close up 5.94 at 2,533.17. Gainers narrowly led decliners 789 to 714 on the New York Stock Exchange. But over-the-counter stocks finished mostly lower, and transportation stocks were big losers as oil gained.
Big Board volume was a still-thin 131.54 million shares, though up from Friday’s 63.35 million.
“The volume would have you believe that no one is getting panicky,” said Jeffrey Kaminski, trader at Mabon Nugent. “Once again, the market has been very myopic responding to the Mideast.”
Oil prices, which peaked at $34.25 a barrel earlier in the day, settled at $32.95, up $1.05.
The U.N. decision on Iraq will likely be a key influence for the near term. “Institutions were extremely quiet and will probably remain so until we get more feedback on the U.N. resolution,” said Ron Doran, director of institutional trading at C. L. King. The White House said it hoped that the U.N. Security Council would vote by Saturday on the proposed deadline.
Among the market highlights:
* MCA slipped 1/4 to 65 1/8 after it agreed to be acquired by Matsushita for $66 a share. The deal does not include MCA’s New York area television station. Arbitragers said the offer was below expectations. Matsushita’s NYSE-traded shares rose 2 1/4 to 128 3/4. Most other movie-company stocks gained slightly on the news, but Paramount fell 1 5/8 to 38 3/8.
* Oil-related issues were mostly higher. Arco rose 2 1/8 to 127 1/8, British Petroleum gained 1 1/8 to 79 5/8, Texaco rose 1 to 58 1/8 and Unocal added 1/2 to 27 7/8.
* Financial stocks in particular were strong, including Well Fargo, up 2 1/4 to 54 1/4; Security Pacific, up 1 1/8 to 22 3/8; HomeFed, up 5/8 to 5 5/8; Golden West, up 1 3/8 to 23 1/2, and Citicorp, up 3/4 to 13 1/8.
* Mentor gained 3/4 to 12 after the Santa Barbara-based medical devices firm said it may buy back up to 1 million of its 10.7 million shares. Among other Southland issues, medical-care provider PacifiCare Health added 3/8 to 15 1/4, following Friday’s 1 3/8 gain. The firm on Monday reported quarterly income of 49 cents a share, up 36% from 36 cents a year ago.
* Browning-Ferris fell 7/8 to 21 1/2 after a meeting with analysts yielded little encouragement about the environmental service company’s near-term results. Prudential-Bache and Morgan Stanley cut their 1991 profit estimates. Waste Management fell in sympathy, losing 1 1/4 to 32 1/8.
In foreign trading, German shares tumbled 2.7% as fears of a war in the Persian Gulf dampened the more positive mood of the past two weeks. The DAX index dropped 40.20 points to 1,443.16.
Shares finished lower in London, as an early romp higher ran out of steam on a wave of profit taking. The Financial Times 100-share index lost 18.6 points to 2,151.9.
Tokyo stocks closed higher, largely for technical reasons. The key 225-share Nikkei average closed up 362.58 points, or 1.6%, at 23,762.86.
CREDIT Bond Prices Gain in Seesaw Session Bond prices rose moderately in slow trading on, sharply reversing course from an early decline amid signs of easing inflation.
The Treasury’s bellwether 30-year bond was up 3/16 point, or $1.88 per $1,000 in face amount. Its yield eased to 8.43% from 8.44% late Friday.
The federal funds rate, the interest on overnight loans between banks, traded at 7.563%, up from 7.50% late Friday.
CURRENCY Dollar Climbs on Fears About Mideast The dollar advanced moderately against most major currencies, boosted by the growing concerns about the Middle East.
Analysts said the foreign exchange markets were “Middle East driven,” with traders focused on the Bush Administration’s attempts to win support for a proposed U.N. Security Council resolution authorizing military force to drive Iraqi troops out of Kuwait.
Investors tend to view the dollar as a safe haven during times of political uncertainty overseas.
The dollar closed at 1.487 marks in New York, up from 1.486 on Friday. The U.S. currency rose as far as 1.494 marks in New York but then fell back, leaving traders skeptical about the dollar’s chances for holding on to its gains.
Meanwhile, the yen suffered as war speculation raised questions about the Japanese economy. The dollar jumped to 129.05 yen in New York from late Friday’s 127.10.
COMMODITIES Grain Futures Off as Sale Hopes Fade Grain and soybean futures prices fell broadly on the Chicago Board of Trade amid fading hopes for new sales of U.S. crops to U.S.S.R.
In Chicago, wheat futures settled 4 to 6 cents lower, with the contract for delivery in December at $2.435 a bushel; corn was 1.75 to 3.75 cents lower, with December at $2.1875 a bushel; soybeans were 2.75 to 5.50 cents lower, with January at $5.765 a bushel.
Elsewhere, gold and silver advanced on the New York Commodity Exchange. Gold for November delivery added $2.40 to $386.10 an ounce; silver rose 2.3 cents to $4.15.
Market Roundup, D8
