STOCKS : Dow, Caught in a Cross-Fire, Climbs 15.84
Stock prices rose moderately Wednesday, boosted by hopes of lower interest rates but restrained by reports of more Iraqi attacks on Israel.
The Dow Jones industrial average rose 15.84 points, or 0.6%, to 2,619.06. Smaller stocks showed considerably more strength, as the NASDAQ over-the-counter composite index jumped 4.88 points, or 1.3%, to 383.91.
In the broad market, advancing issues outnumbered declines by almost 2 to 1 in nationwide trading of New York Stock Exchange stocks, with 998 up, 517 down and 468 unchanged. Big Board volume slipped to 169.44 million shares from 175.59 million Tuesday.
News of air raid sirens in Israel diverted investors’ attention from prospects that the Federal Reserve could soon cut interest rates again. But all-clear alerts and reports that Scud missiles may have been intercepted helped stocks recover.
Despite trading jitters, some analysts said investors remained upbeat after Fed Chairman Alan Greenspan indicated that interest rates may need to be lowered to combat tight credit.
Though he sounded cautious in House testimony on Tuesday, Greenspan on Wednesday told the Senate Banking Committee that a reduction in the federal funds rate--the rate banks charge each other for overnight loans--may come sooner rather than later.
Still, the war is restraining optimism of many big investors. “Everybody settled into the realization this war is going to go on for a while,” said Peter Hagerman, chief executive at Hallmark Capital Management.
Among the market highlights:
* Oil stocks rebounded from their recent battering, and were largely responsible for the Dow index’s gain. Mobil rose 1 to 57 3/4, Chevron gained 2 to 74, Arco leaped 3 5/8 to 117 7/8, Halliburton added 2 1/2 to 44 1/4 and Baker Hughes rose 1/2 to 24. Baker reported quarterly earnings up 30%.
* Several technology stocks plunged on disappointing earnings reports. Conner Peripherals slumped 2 7/8 to 24 3/8, Computer Associates lost 1 1/4 to 7 1/2, Quantum dropped 2 7/8 to 18 3/8 and Software Publishing plummeted 6 to 19.
But many smaller tech stocks continued to advance, building on the powerful rally of recent weeks. Among Southland issues, International Rectifier rose 3/4 to 10 7/8, Western Digital added 1/2 to 5 3/8, Advanced Logic rocketed 2 3/4 to 13 and Whittaker jumped 1 1/4 to 12 1/4.
* Disappointing earnings knocked 3M down 4 1/4 to 80 3/4. Also, Inland Steel dropped 1 3/8 to 20 1/4 after it slashed its dividend 57%. But some other industrial stocks rebounded, including Alcoa, up 1 1/4 to 59 3/4; Nucor, up 2 1/8 to 65 1/2, and Ford, up 1 to 27 5/8.
* Telephone stocks continued to plunge after Pacific Telesis and Bell Atlantic announced poor earnings on Tuesday. PacTel slumped 1 1/2 to 39 3/4, Bell Atlantic dropped 2 3/8 to 47 5/8, Ameritech lost 1 5/8 to 63 3/8 and Southwestern Bell lost 2 3/8 to 50 1/4.
* Circus Circus slumped 3 3/8 to 49 7/8. First Boston cut earnings estimates, citing slowing casino revenue growth since the start of the Persian Gulf War.
Elsewhere, engineering firm Fluor jumped 3 to 42 on expectations that it will be tapped to help rebuild Kuwait after the war.
* Many health-care stocks added to their recent rally, including Amgen, up 2 to 70 3/4; Mentor Corp., up 1 3/8 to 19 3/8; Diagnostic Products, up 1 3/4 to 31 1/2, and Centocor, up 2 1/4 to 49 3/4.
* Security Pacific advanced 2 1/8 to 20 1/4, after rising 1 5/8 on Tuesday, following disclosure that it had begun--and then terminated--merger talks with Wells Fargo. Wells lost 1 5/8 to 55 1/4.
* IDB Communications rose 1 1/4 to 8 1/4. Some investors may be expecting the Culver City communications company to gain from its remote-broadcast satellite business in the Middle East.
* Newport Beach-based surf apparel firm Quiksilver closed at 11 1/2, unchanged. But after the close, the company said that earnings in the quarter ending Jan. 31 will be below year-ago levels, and that the trend could continue if the economy remains weak.
* CBS tumbled 13 to 153 after completing a 10.5-million-share tender offer.
In overseas trading, London stocks slipped, as the Financial Times 100 index lost 1.10 points to 2,080.50. German stocks continued to decline broadly. The DAX index fell 16.36 points to 1,358.76.
In Tokyo, the Nikkei index fell 203.55 points to 23,050.10.
CREDIT Hints of Fed Action Lift Bond Prices The expectation of further interest rate cuts sent bond prices higher during cautious trading.
The Treasury’s key 30-year bond rose 17/32 point, or $5.31 per $1,000 in face amount. Its yield fell to 8.20% from 8.24% Tuesday.
“The market is becoming more immune to Scud missile attacks,” said Jay Goldinger, chief market strategist for Capital Insight of Beverly Hills. He said investors still have an urge to sell when they hear about air raid sirens in Israel, but they’re now focusing more on the market’s fundamentals.
On Wednesday, Fed Chairman Alan Greenspan gave strong hints that the Fed intends to push interest rates lower to help rejuvenate the foundering economy.
The federal funds rate, the interest on overnight loans between banks, rose to 11% from 6.75% late Tuesday. The rate often fluctuates wildly on alternate Wednesdays, which are settlement dates on which banks must report their reserves to federal authorities.
CURRENCY Dollar Falls on Signs of Interest Rate Cut The dollar was pushed down by a growing sense among traders that the Federal Reserve will continue to lower interest rates.
Dollar traders have been trying to resist the idea that U.S. interest rates will drop again, but comments by Fed Chairman Alan Greenspan on Wednesday suggested lower rates were imminent. Lower rates would make dollar-denominated investments less attractive.
The dollar settled in New York at 1.482 German marks, down from Tuesday’s 1.497. The dollar also fell to 131.72 Japanese yen from 132.68.
COMMODITIES Silver Futures Close at a 15-Year Low Silver futures prices plunged to 15-year lows as hopes for a quick resolution to the Gulf War continued to recede, leaving traders to ponder an oversupply weighing on the market.
Silver settled 9 to 10.6 cents lower on New York’s Commodity Exchange, with the contract for spot delivery at $3.91 an ounce, the lowest spot silver price since February, 1976. The more active March contract finished at $3.94.
Gold futures ended $1 to $1.40 lower on the Comex, with the spot contract at $378.40 an ounce. Platinum settled $5.70 to $5.80 lower, with the spot January contract at $394.80.
Silver’s value generally has fallen as the economy slowed, reflecting both its relative abundance and its use as a major component in the photographic, jewelry and electronics industries.
Silver had dropped to $3.93 an ounce in mid-December, but then rebounded by mid-January to nearly $4.20 as investors, unnerved by the threat of war in the Persian Gulf, sought the perceived safety of precious metals.
But recent developments indicate the Gulf War may last longer than many observers expected when U.S.-led forces first attacked Iraqi positions last week, and investors again are focusing on the possibility the U.S. economy will suffer in a prolonged war, according to Frederick Demler, metals economist with Paine Webber in New York.
John Jonat, precious-metals analyst with Deak International Inc., said the silver market “gave up the ghost” on following gold higher and has again come under pressure from oversupply.
Both analysts said further selling was prompted by silver’s drop below $4, a psychological barrier that they said now looks more difficult to surmount than a month ago.
Market Roundup, D8
