Dow Rises 28.46 to Break 6-Day Losing Streak
Stocks rose Thursday for the first time in 1991, spurred by bargain hunting after Wednesday’s big war-scare selloff.
The market’s modest gains followed losses in all six prior sessions this year.
The Dow Jones industrial average closed up 28.46 points, or nearly 1.2%, at 2,498.76. The index had dropped 39.11 points Wednesday. In the broader market, advancing issues outnumbered declines by about 3 to 2 Thursday in nationwide trading of New York Stock Exchange-listed stocks, with 892 up and 598 down.
But volume on the Big Board retreated to 124.51 million shares from Wednesday’s 191.10 million.
“It’s a technical bounce,” said Ron Doran, director of institutional trading at C. L. King & Associates. “There have been some people putting a little money to work.”
Edward Shopkorn, general partner at Mabon Nugent, said: “Some of this is bargain hunting. Most purchases I’ve seen are by institutions looking to add on quality stocks at lower prices.”
A rally in the bond market lent support, analysts said.
“People are afraid to do anything,” said John McElroy, principal at 1838 Investment Advisors, regarding Thursday’s action. “Those who got caught yesterday don’t want to look stupid today (Thursday).”
Hope that the United Nations will be able to steer the Mideast crisis to a peaceful solution also lured buyers, although investors generally remained wary after Wednesday’s activity, market analysts said.
Thursday’s low volume suggests “there are still question marks,” said C. L. King’s Doran. Traders said the muted action also showed that many big investors fully expect a war between the United States and Iraq, but that it will be short, and that the U.S. forces will win decisively. So most investors see no reason to unload stocks now.
U.N. Secretary General Javier Perez de Cuellar was to leave for Baghdad on Thursday night for talks with Iraqi President Saddam Hussein.
Among the market highlights:
* Industrial stocks led the rebound, as some investors looked ahead to what they expect will be a recovering economy later in 1991. Alcoa jumped 1 3/8 to 55 1/2, Bethlehem Steel rose 1/2 to 14, International Paper gained 1 1/2 to 52 7/8 and Cummins Engine leaped 1 5/8 to 34 1/4.
Ford added 1/2 to 25 5/8 after it decided against cutting its 75-cents-a-share quarterly dividend.
* Drug stocks bounced back from recent selling. Merck rose 1 1/8 to 83 3/8, Bristol Myers added 1 5/8 to 63 and Amgen was up 2 1/8 to 60 1/2.
* Financial stocks were mixed. J. P. Morgan rose 1 1/8 to 44 1/2 and Federal National Mortgage gained 1 1/8 at 34. But Security Pacific dropped 1 1/8 to 17 7/8, nearing its 52-week low of 17.
* Microsoft jumped 4 1/4 to 78 1/4. Several analysts repeated “buy” ratings or raised earnings estimates on the software company after it unveiled an enhanced spreadsheet program Wednesday. Among other tech stocks, AST Research soared 3 to 35 1/8 and Apple Computer rose 1 7/8 to 47 1/8. But Optical Radiation fell 1 to 21 1/2 after Kidder Peabody cut its recommendation to hold from buy, citing lowered earnings expectations of $1.90 a share this year, versus a previous estimate of $2.
* Limited Inc. attracted interest for the second straight session, adding 1 to 19 1/4. Analysts expect a new president for the Limited Stores division to spur growth. Elsewhere, Gap Inc. jumped 2 1/2 to 35 5/8 as investors flocked back to the stock, a recent favorite.
In overseas trading, German shares defied market worries about a Mideast war. In Frankfurt, the 30-share DAX index ended a volatile session 8.24 points higher at 1,383.40.
But in London, stocks ended lower as traders retreated. The Financial Times 100-share index fell 20.2 points to end at 2,108.7.
In Tokyo, the market ignored the Persian Gulf crisis and closed firmer after a day of volatility stemming largely from index-related buying, mostly by foreign brokers. The key 225-share Nikkei index rose 78.09 points to close at 23,047.36. At midday today, the Nikkei was down 115.57 points.
CREDIT Bond Prices Rise With Hope of Peace Bond prices shot up dramatically on speculation that Perez de Cuellar’s trip to Baghdad might avert war in the Persian Gulf.
The Treasury’s bellwether 30-year bond was up 1 15/32 point, or $14.69 per $1,000 in face amount, by Thursday’s closing. Its yield, which moves in the opposite direction from the bond’s price, fell to 8.32% from 8.45% late Wednesday.
“Hope springs eternal. People are clutching at that as one more chance that a peaceful solution is ahead,” said Elliott Platt, research director at Donaldson, Lufkin & Jenrette Securities Corp.
Economist Carol A. Stone of Nomura Securities said the market was recovering losses from Wednesday’s selloff, in which the 30-year bond fell 13/16 point.
Also figuring in the rally were discussions among economists that the recession will be more severe than first thought, she added. Investors generally turn to safe government bonds during times of economic instability.
The federal funds rate, which represents interest on overnight loans between banks, traded at 7.25% at closing, up from 5.50% late Wednesday. The rate has varied widely for several sessions, but economists expect it to stabilize near 6.75%, the level believed to be the Federal Reserve’s target.
CURRENCY Dollar Falls After Volatile Trading The dollar declined against most major foreign currencies as traders caught their breath following Wednesday’s unnerving session.
In New York, the dollar closed at 134.50 Japanese yen, down sharply from Wednesday’s 137.05. It also closed at 1.526 German marks, down from 1.537. The British pound rose to $1.912, up from Wednesday’s $1.897.
Currency dealers said trading consisted mostly of follow-through from volatile overnight trading in Asia, when foreign traders drove the dollar down and then up amid conflicting sentiments about chances for peace in the Mideast.
“By the time New York came in today the moves were over,” said Maria Nordone, vice president and sales manager for Security Pacific National Bank in Los Angeles.
The quiet trading contrasted with the dollar’s jump Wednesday in reaction to the breakdown in U.S.-Iraq talks to resolve the Mideast crisis, which boosted the currency’s safe-harbor appeal.
On Thursday, though, “nobody went out and bought dollars or sold dollars. We’re in a holding pattern. The longer we stay in a holding pattern, the greater chance the dollar will come off based on economic fundamentals,” said Thomas J. Palladino, trader at Oesterreichische Landerbank in New York.
COMMODITIES Energy Futures Up During News Lull Energy futures showed modest gains on the New York Mercantile Exchange as new efforts were made to resolve the crisis in the Persian Gulf.
Trading was in marked contrast to that of Wednesday, which saw prices fall dramatically in early trading on hopes of peace in the Middle East, only to rocket later in the day due to failed U.S.-Iraqi talks.
Analyst Jim Ritterbusch of Paine Webber said there was little news to guide the market as attention shifted to efforts by the U.N.’s Perez de Cuellar to resolve the gulf standoff. Light sweet crude oil for February closed at $27.71 a barrel, up 45 cents. It traded as high as $28.90.
On the New York Commodity Exchange, February gold drifted in a narrow range throughout the session, finally settling at $392.10 an ounce, off 90 cents. Silver for February lost 3 cents to $4.12.
Market Roundup, D6
