STOCKS : Dow Up 18.32 Despite Worries Over Gulf War
Wall Street went fishing for bargains Wednesday in the face of the looming war that broke out hours after trading ended.
The Dow Jones industrial average closed up 18.32 at 2,508.91, the second straight rise in the index despite the feeling that war was about to break out.
Advancing issues outnumbered declines by about 5-to-3 in nationwide trading of New York Stock Exchange-listed stocks, with 916 up, 561 down and 486 unchanged.
Big Board volume came to 134.56 million shares, up from the 109.98 million traded Tuesday.
“There are more bargain hunters than panic sellers,” said Robert Stovall, president of Stovall/21st Advisers.
“The market is concluding this is the most well-advertised war of the electronic market era. Most of the selling has already been accomplished.”
“What you’re really seeing is pent-up demand,” said Alan Newman, a technical analyst at HD Brous & Co. “We’ve been cautiously advising people to nibble on their favorites.”
The stock market showed that it still was not immune to news-induced gyrations, with the Dow index careening through a 34-point range.
At mid-session, stocks rallied briefly when the State Department said it would consider any new Iraqi initiatives in the Persian Gulf--viewed as an after-the-deadline olive branch from Washington.
“The thinking was Saddam had made some kind of move to pull out, but in reality, we were just saying that if he made a move, we would consider it,” said Gene Jay Seagle, director of research at Gruntal & Co.
Comments by U.S. and world officials left little doubt that an attack would occur. The White House urged U.S. journalists to leave Iraq, saying a war “could begin at any time.”
The focus on the Mideast blunted the impact of economic reports, which showed that prices are rising despite the deepening recession.
Consumer prices rose 0.3% in December, the Labor Department said, leaving the year’s inflation rate at a nine-year high of 6.1%.
The Federal Reserve separately reported that industrial production declined for the third straight month in December by a steep 0.6%.
Among the market highlights:
* Caterpillar lost 2 1/4 to 43 5/8. A Wertheim Schroder analyst slashed his 1991 earnings estimate for the industrial equipment company.
* Several bank stocks were down on disappointing earnings reports. Analysts cut 1991 estimates on Manufacturers Hanover, which lost 1/8 to 18 1/4.
Strong results from Digital Equipment and Borland International spurred a rally in the technology group.
* Digital added 6 5/8 to 59 3/8, Apple Computer rose 3 to 49 3/4, IBM gained 1 1/2 to 109 and Microsoft added 3 7/8 to 82 1/4.
* Merry-Go-Round Enterprises, which estimated higher quarterly earnings, climbed 1 1/2 to 19.
* Cyclops Industries shot up 7 1/2 to 19 3/4. Armco Inc. agreed to acquire the company for $22 a share.
* NCR rose 1 to 85 1/4. American Telephone & Telegraph, which is offering $90 apiece for NCR’s shares, said it had received tenders for about 70% of the stock, and extended the offer’s expiration date by a month, to Feb. 15.
* AT&T; added 1/2 to 29 3/4. Other gainers among the blue chips included Philip Morris, up 3/8 at 49 3/4; Pepsico, up 3/4 at 24 7/8, and Bristol-Myers Squibb, up 1 3/4 at 65 1/8.
In foreign trading, Japanese stocks fell sharply as the U.N. deadline passed in midafternoon. The Nikkei 225-share average closed down 770.53 points, or 3.32%, at 22,442.70. The market had been closed Tuesday for a national holiday.
Share prices closed lower with volume slowing to a trickle on London’s Stock Exchange. The Financial Times 100-share average ended down 16.1 at 2,054.8.
In Germany, trading was thin as dealers sat back and waited for the next move in the gulf. The 30-share DAX index ended 2.94 points lower at 1,322.68.
CREDIT Bond Prices Fall in Light Trading Paralysis gripped the bond market for a second day as traders waited for news of war. Prices were slightly lower in light trading advanced mostly by headlines and rumors, traders said.
The Treasury’s benchmark 30-year bond fell 1/32 point, or 31 cents per $1,000 in face amount, by closing Wednesday. Its yield rose to 8.40% from 8.38% late Tuesday.
Trading volume was “as close to a standstill as it comes,” said Dan Seto, economist for Nikko Securities Co. International Inc.
“Until something happens one way or the other in the gulf, this logjam, this paralysis, or whatever you might want to call it, will not change,” said Irwin Kellner, chief economist for Manufacturers Hanover Trust Co.
Kellner and others said the market barely responded to the release of key government reports in consumer prices, inflation and industrial production.
The federal funds rate, the interest on overnight loans between banks, held at 6 11/16%, unchanged from late Tuesday.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds fell 2/32 point to 90 22/32. The average yield to maturity was 7.52%, up from 7.51% late Tuesday.
CURRENCY Dollar Gains While Traders Await News The dollar moved higher in stagnant trading as the foreign exchange markets waited to see if war would erupt in the Middle East.
While some traders bought dollars Wednesday, “general activity is at a standstill, waiting for an outbreak” of fighting, said Ronald Holzer, chief foreign exchange dealer with Harris Trust & Co. in Chicago.
The U.S. currency continued to gain from its reputation as a relatively safe investment in times of international strife.
“There aren’t too many people wanting to sell at these levels with war just around the corner,” said Mike Faust, a foreign exchange analyst with MMS International in Chicago.
Overseas trading was also quiet. Many European dealers showed up at their desks before the deadline, but rates and prices changed little in the hours after it passed.
Traders were resigned to remaining on the sidelines to await the next move in the gulf, a Zurich gold trader said.
In New York, the dollar closed at 1.54615 German marks, up from 1.5420 marks Tuesday, and at 136.83 Japanese yen, up from 135.73 yen. The British pound fell to $1.9050 from late Tuesday’s $1.9095.
COMMODITIES Gold Futures Settle Higher on War Fears Volatile was the description given gold futures Wednesday, as headlines, mainly out of Washington, caused prices to fluctuate wildly on New York’s Commodity Exchange.
Gold for February delivery traded in a range of nearly $11 as the market was buffeted by rumors of a new Persian Gulf peace initiative. Gold futures eventually settled $4.30 higher as fears of war outweighed other considerations.
On other markets, energy futures were higher, livestock and pork futures gained, grain and soybean futures advanced, and orange juice futures plunged.
Market Roundup, D8
