Stocks Absorb Soviet Bombshell; Dow Up 2
Blue-chip stocks made a swift recovery today after diving 28 points on the surprise resignation of the Soviet foreign minister.
The Dow Jones industrial average ended up 2.73 points at 2,629.46. The broader market lagged behind. Losing issues on the New York Stock Exchange outnumbered gainers by about 4 to 3.
Big Board volume totaled 174.70 million shares, against 180.38 million in the previous session.
Stocks began the day trading sharply lower on news that Soviet Foreign Minister Eduard A. Shevardnadze was resigning.
“It creates so many question marks, so the reaction was to the downside,” said Ron Doran, director of trading at C. L. King & Associates.
But after traders absorbed the news, the blue chip index erased its losses and began to rally.
“It’s a strong market that seems to be able to shake off any negative news,” said Tom Epperson, director of research at Morgan Keegan & Co. “That’s probably the type of market we’ll have for the rest of the year.”
The market got some support from First National Bank of Chicago’s decision to cut its prime lending rate to 9.5% from 10%, a move expected to be followed by other big banks.
The dollar rallied because of its status as a safe haven in times of uncertainty. It traded at 1.5010 German marks, compared with 1.4780 Wednesday.
Strength in International Business Machines Corp. also spilled over into the broader market.
“We’re seeing a very nice rally in some bank stocks,” said Gene Jay Seagle, director of technical research at Gruntal and Co. “And IBM is showing signs of becoming an important leader, something the market hasn’t had for a long time.”
Stock investors ignored a government report that personal income rose 0.3% and consumption rose 0.1% last month, analysts said.
Midlantic Corp. fell after the banking company decided to omit its quarterly dividend. Its shares were off 3/4 to 5 3/8.
Apple Computer Inc. surged 2 to 43 7/8. An Alex Brown analyst said he upgraded his rating to a “strong buy” and raised his earnings estimates.
Shearson Lehman Bros. raised its rating on 18 U.S. regional banks, including seventh-largest NCNB Corp.
