STOCKS : Shevardnadze News Jolts, but Dow Recovers
After dropping quickly in early trading on news that Soviet Foreign Minister Eduard A. Shevardnadze had resigned, stocks closed mixed Thursday.
The expiration today of certain stock options, and strength in technology and financial service stocks, helped sentiment.
The Dow Jones industrial index closed up 2.73 at 2,629.46. It was off nearly 30 points early on. Volume on the New York Stock Exchange was a brisk 174.7 million shares, down from 180.4 million Wednesday. But in the broad market losing issues topped gainers 818 to 716.
Following most overseas markets, blue chips started the day lower as investors reacted to the Soviet foreign minister’s resignation. The concern, one trader noted, was that “the peace dividend could be in jeopardy.”
But a late-morning rally in IBM and advances in some banking issues helped turn prices around. IBM rose 1 to 113 3/4.
“IBM is acting like the leader of the market,” said Tom Gallagher, head of block trading at Oppenheimer & Co. “We’re still looking for lower interest rates,” he noted, so investors now are weighing the good news of lower rates against the potential bad news of weak corporate earnings in a sliding economy.
Among the market highlights:
* Tech stocks as a group continued their recent rally. Apple Computer rose 2 1/8 to 44 after Alex. Brown & Sons raised its rating and earnings estimates. Intel climbed 1 1/4 to 39 after Merrill Lynch repeated a buy rating based on the company’s development of a more powerful version of its popular 486 microprocessor.
Among Southland tech stocks, FileNet jumped 1 1/2 to 8 1/4, Logicon gained 3/4 to 15 5/8 and Tandon rose 1/4 to 2 1/8.
* Among banking stocks, Manufacturers Hanover rose 1 5/8 to 24 1/8, Citicorp added 1/2 to 13 3/4, BankAmerica climbed 1 3/8 to 28, Wells Fargo rose 2 to 60 3/8 and Bankers Trust added 5/8 to 45 1/4.
Insurers also rebounded on interest rate hopes. Broad rose 1/2 to 5 3/4, Argonaut gained 3 1/2 to 63 and General Re added 2 1/8 to 91 3/4.
In Frankfurt, German share prices tumbled 3.3%, closing at their lowest since Nov. 14, on word of Shevardnadze’s resignation. The 30-share DAX index dropped 47.98 to close at 1,409.26.
In London, stocks also closed sharply lower. The Financial Times-Stock Exchange index of 100 leading British shares fell 19.9 to 2,158.8.
In Tokyo, stocks closed down and near their lows in sluggish and featureless trading after two days of rises prompted investors to take profits. The 225-share Nikkei average fell 351.84 to 24,524.94.
At midday today, the Nikkei was off 472.13 points, to 24,052.81, on reaction to the Soviet turmoil.
CREDIT Bond Prices Fall on Profit Taking Unsettling political news and end-of-year profit-taking sent bond prices sliding again.
The Treasury’s bellwether 30-year bond fell 5/8 point, or $6.25 per $1,000 in face amount. Its yield jumped to 8.23% from 8.17% late Wednesday.
The drop combined with Wednesday’s bond slump to more than wipe out Tuesday’s surge, when the Federal Reserve cut a key lending rate for banks to try and jump-start the weak economy.
On Thursday, unexpected news that the Soviet foreign minister had resigned sent shivers through foreign markets and gave U.S. traders reason to sell securities.
The federal funds rate, the interest on overnight loans between banks, traded at 7.125%, up from 7.06% late Wednesday.
CURRENCY Dollar Rockets as Worries Increase The dollar jumped as traders sought a safe haven in the wake of the uncertainties created by the resignation of the Soviet foreign minister.
Although traders were buying dollars, much of the day’s activity centered on selling the German mark on the theory that Germany is more widely exposed to the economic and political climate in the Soviet Union.
“Germany has large loans outstanding (to the Soviet Union), and because of German monetary union, there was great expectation that they would find a huge export market within the Soviet Union,” said Michael Malpede, analyst at Refco Ltd. in Chicago.
In New York, the dollar leaped to 1.51 German marks from 1.478 Wednesday. It also jumped to 135.85 Japanese yen, up from 134.05 on Wednesday.
COMMODITIES Orange Juice Prices Rise on Freeze Fears Prices of orange juice futures soared to a 2 1/2-month high on the New York Cotton Exchange as the faint prospects for a weekend freeze in the Florida citrus belt ignited panic buying for the second time this week.
Frozen concentrated orange juice futures settled 5 to 9.95 cents higher in New York, with the contract for delivery in January up 9.95 cents at $1.20 a pound.
Silver futures rose sharply on New York’s Commodity Exchange in a technically inspired continuation of Wednesday’s powerful gains, which were sparked by the Federal Reserve Board’s decision to cut its discount rate. Silver jumped 10.3 to 10.9 cents, with December at $4.20 an ounce.
Gold futures fell modestly, following the crude oil market, after rising sharply on Wednesday. Gold settled 80 cents to $2.20 lower, with December at $385.20 an ounce.
Light sweet crude oil settled 20 to 69 cents lower, with February at $26.39 a barrel.
Market Roundup, D10
