FINANCIAL MARKETS : STOCKS : Wall St. Yawns as Fed Cuts Rates; Dow Off 12
Stocks eased Friday as investors shrugged off an interest rate cut by the Federal Reserve, focusing instead on bleak economic news.
The Dow Jones industrial index slipped 12.38 points to close at 2,590.10. For the week, the index gained 30.45 points.
The broader market also was weak. The Standard & Poor’s 500 index Friday lost 1.32 points or 0.4% to 327.75. The NASDAQ over-the-counter composite fell 0.75 points or 0.2% to 371.54.
Big Board volume was 164.95 million shares, down sharply from 256.38 million the previous session. Declining issues slightly outnumbered advances in nationwide trading of New York Stock Exchange-listed stocks, with 759 up, 778 down and 500 unchanged.
“Now that there’s some comforting (news) in the Mideast situation, there’s more focus on the domestic economy, which continues to show evidence of difficulty,” said analyst Thomas Ryan at Kidder Peabody.
The Labor Department said the nation’s unemployment rate in November rose to a three-year high of 5.9%, and the number of jobs outside the farming sector plunged.
The figures were taken as further signs that the country may be in recession. Peter Davies, a vice president at Nomura Securities, said that while the November unemployment rate was within expectations, the steep drop in payrolls “was negative for stocks in that economic growth is much weaker than expected.
“The recession forecast may be longer than expected,” he said.
Also, Mideast war worries still plague traders, even though the crisis appears to be nearing a peaceful solution.
Among market highlights:
* Bank stocks fell back, after rallying sharply earlier in the week. California banks led the decline as investors feared greater loan losses from the weakening economy. Security Pacific plunged 3 to 22, BankAmerica lost 1 1/4 to 24 and Wells Fargo fell 2 7/8 to 55 1/4. Chase lost 5/8 to 11 3/4 and First Chicago fell 1 3/8 to 19 5/8.
* Insurance stocks were mostly lower, but four Southland firms surged. Twentieth Century jumped 1 1/8 to 26, Fremont General rose 5/8 to 13 3/8, Broad added 3/8 to 5 3/8 and Mercury General gained 1 3/4 to 22 7/8.
* Orion Pictures fell 1 1/2 to 13 3/4. Korea’s Samsung denied a Times report Thursday that the company was interested in buying Orion. The stock jumped 2 1/4 Thursday.
* IBM rebounded to 112 1/2, up 1, after falling sharply Thursday. Prudential-Bache repeated a buy rating on the stock. Among other tech stocks, AST Research surged 1 to 29 3/4, a 52-week high.
* Melville lost 2 7/8 to 38 7/8. Smith Barney cut fourth-quarter and full-year estimates after the retailer reported soft November sales. Other retail losers included Nordstrom, down 3/4 to 23, and May Department Stores, down 1 1/2 to 44.
* Teledyne dropped 3/8 to 14 5/8 after the company said fourth-quarter earnings will be about break-even because of a planned closing of its Monarch Rubber unit and because of cost overruns in certain defense contracts.
* Humana fell 1 7/8 to 43 1/2. First Boston downgraded the hospital firm to hold from buy, traders said.
Optimism about the Mideast crisis and continued confidence from the reelection of German Chancellor Helmut Kohl gave German stocks a lift. The DAX index finished up 8.17 points at 1,512.84, a rise of 71.61 points from last Friday.
In London, prices finished higher after a calm session. The Financial Times 100-share index was up 5.9 points at 2,183.4.
In Tokyo, the Nikkei index rocketed 969.39 points, or 4.3%, to 23,522.49 on easing fears about the Mideast situation. That left the index up 1,067.86 on the week.
CREDIT Jump in Bond Prices Biggest Since June 1 Bond prices recorded the biggest one-day jump in more than six months, propelled by grim unemployment figures and clear signs that the Federal Reserve moved to ease interest rates.
The Treasury’s bellwether 30-year bond leaped 1 3/4 point, or $17.50 per $1,000 in face amount. Its yield plunged to 8.19% from 8.33% late Thursday. It was the lowest yield since 8.17% on Jan. 12.
Shorter-term bonds also surged in price, and interest rates declined across the board.
The sharp price rise in the long-term bond was the largest since June 1, when the bond also jumped on a big increase in unemployment. At that point, the yield on the Treasury bond was 8.44%.
The rise in the unemployment rate to 5.9% in November, highest in three years, was enough to persuade the Fed to ease credit further, to help the economy avoid a free fall. By day’s close the federal funds rate--the rate banks charge each other for overnight loans--had tumbled to 7.063%, down from 7.438% late Thursday.
The Fed can influence that rate by adding money to the banking system, which it did Friday. The Fed’s apparent new target rate for fed funds is 7.25%, down from 7.50%, traders said.
CURRENCY Economic Reports Push Dollar Down The dollar closed sharply lower after the Federal Reserve cut interest rates amid further evidence that the economy is weakening.
“The focus now is on the weak economy and softer U.S. rates. And that obviously means a lower dollar,” said Earl Johnson of Harris Trust & Savings Bank. That will make U.S. investments less appealing to foreigners.
The dollar ended at 1.472 German marks, down from 1.488 Thursday. It is nearing its all-time low of 1.464 set Nov. 19. Against the Japanese yen the dollar fell to 130.70 from 132.14 Thursday.
COMMODITIES Precious Metals Sink at the Comex Precious metals continued their slide on New York’s Commodity Exchange, paced by a sharp drop in platinum prices that was caused by the jump in U.S. unemployment.
Silver prices were also hard hit. Both platinum and silver are heavily used in industry.
Platinum settled $7.90 to $8.50 lower, with the contract for delivery in January at $413.40 an ounce.
Gold was $1.10 to $1.90 lower, with February at $372.10 an ounce; silver slumped 6.2 to 7.8 cents, with December at $4.05 an ounce.
In other markets, the unraveling of four years of world trade talks depressed corn and soybean prices. Meanwhile, crude oil for delivery in January closed up 18 cents at $26.58 a barrel on the New York Mercantile Exchange.
Market Roundup, D6