STOCKS : Dow Up 4 on Economic Optimism
Investors betting on a swift rebound in the economy pushed stocks higher Monday, although a late bout of program selling shaved an advance in blue chips.
The Dow Jones industrial averaged closed up 4.21 points at 2,914.11. The index had been up more than 25 points.
In the broad market, advancing issues outnumbered declines by about 5 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with 1,009 up, 605 down and 443 unchanged. Big Board volume fell to 199.83 million shares from Friday’s 221.51 million.
Smaller, less-capitalized stocks--which are less affected by computer-driven program trading--chalked up an average gain of 1%: The NASDAQ composite index jumped 4.40 points to 461.13.
“In the wake of the favorable settlement in the Gulf War, people are looking for an improvement in consumer confidence and for some upturn in the U.S. economy,” said Peter Davies, a vice president at Nomura Securities International.
The market heard evidence of that Friday, when the nation’s purchasing managers reported the first gain in their monthly index in nine months, suggesting that the manufacturing sector improved slightly in February.
While some analysts say an economic recovery may be slow, the stock market seems to have built up enough momentum to forge ahead to new highs. “There’s not a lot of reasons to be negative,” said James Wright, chief investment officer at Banc One Asset Management. “I think the next load of potentially bad news could come from company earnings, but that won’t happen until mid- to late April.”
Among market highlights:
* Many industrial issues rose on new hopes for the economy. Deere jumped 1 3/8 to 53 3/8, Alcoa rose 1 1/8 to 66 7/8, Nucor gained 1 3/4 to 73 3/8, Eaton added 1 to 58 3/8, Phelps Dodge jumped 1 1/2 to 68 1/8 and Goodyear rose 1 1/2 to 22 5/8.
* Southland S&L; stocks were strong as optimistic investors apparently went bargain-hunting. Coast Savings rose 1/2 to 4 3/8, HomeFed gained 5/8 to 6 1/4 and Downey Savings added 5/8 to 15 1/4.
Meanwhile, Security Pacific plunged 3 to 29. Brown Bros. Harriman cut its rating on Security to neutral from buy and recommended that investors buy Wells Fargo instead, which rose 1 1/8 to 77 3/4. Both stocks rose sharply Friday on renewed merger rumors.
* American Stores closed up 4 7/8 at 75 1/2. The supermarket chain reported fourth-quarter earnings of $2.49 a share, well above Wall Street estimates. Other grocery chains rose as well, including Vons, up 1 1/8 to 26 1/4.
* Advanced Micro Devices added 1 1/4 to 9 1/4 after a court allowed it to continue using the “386” designation for its line of 32-bit microprocessors. Intel had tried to claim trademark status on the “386” name. Its shares closed up 1/4 at 48.
* CBS jumped 5 1/4 to 179 on renewed speculation that it is in takeover talks with Disney, which lost 1 7/8 to 122.
* Biotech firm Centocor rose 1 to 65 1/4. Investor George Soros revealed that he has taken a 7.6% stake in the firm as an investment. Meanwhile, the major investor in Torrance-based International Technology, a hazardous-waste disposal firm, proposed that the company be sold. The investor, the Mathers Fund mutual fund, holds 6.8% of International Technology. The stock rose 5/8 to 10 5/8.
* Cimco, a Costa Mesa-based plastics producer, lost 1/2 to 9 1/2 after saying quarterly earnings fell 13%. Meanwhile, Laguna Niguel-based Furon jumped 1 to 14 1/2. It introduced a new polymer material, Meldin 2,000, that the firm says has broad industrial uses. It projected first-year sales of $5 million.
* Among smaller Southland stocks helping to lead the NASDAQ market higher were PacifiCare Health, up 1 5/8 to 24; FileNet, up 3/4 to 12 1/2; Optical Radiation, up 1 3/4 to 27; and Barry’s Jeweler’s, up 1 to 2 3/4.
In overseas trading, stocks closed moderately higher in light trading in Tokyo. The 225-share Nikkei average was up 94.45 points to 25,976.02.
German shares ended 0.9% higher after a support level at 1,520 points on the 30-share DAX index held, giving investors confidence to pick up stocks in small volumes. The DAX ended 14.12 points higher at 1,530.86.
British stocks fell as buying interest waned, allowing the market a breather after a strong showing last week. The Financial Times 100-share average fell 4 points to 2,382.9.
Credit
Bond prices were marginally lower in sluggish trading as the market awaited signs of economic recovery now that the war is over.
The Treasury’s key 30-year bond fell 3/32 point, or about 94 cents per $1,000 in face amount. Its yield, which rises when the price falls, edged higher to 8.29% from 8.28% late Friday.
Analysts said the market remains confused about the economy’s direction now that the war has ended. A prolonged recession could be healthy for the bond market because of the prospect of lower interest rates to stimulate economic activity.
However, a quick recovery would influence the Federal Reserve to keep interest rates at current levels to thwart inflation. That would depress bonds.
“Oil prices were higher (Monday), commodity prices were higher,” said Ward McCarthy, analyst with Stone & McCarthy Associates of Princeton, N.J. “There are prospects of some inflation concerns, and that continues to weigh fairly heavily on the bond market.”
The federal funds rate, the interest on overnight loans between banks, was quoted at 6.125%, down from 6.25% late Friday.
Currency
The dollar closed mixed against major foreign currencies as traders took a breather after last week’s big dollar gains.
“We’re now in . . . the consolidation before the trend resumes on the upside,” said Robert Ryan, foreign exchange manager with Bank of New York. If the U.S. economy continues to strengthen, the dollar is bound to rise with it, analysts say.
In New York, the dollar was unchanged from Friday at 1.536 German marks. It also closed at 135.49 Japanese yen, up from Friday’s 134.60.
Commodities
Petroleum futures jumped on the New York Mercantile Exchange amid buying driven by expectations of OPEC production cuts.
Light sweet crude oil futures settled 25 to 87 cents higher, with the contract for delivery in April up 87 cents at $20.25 a barrel; home heating oil was 1.55 to 1.84 cents higher, with April at 56.13 cents a gallon.
Crude prices were boosted by widespread expectations that the members of the Organization of Petroleum Exporting Countries will agree at a meeting next week in Geneva to cut production in hopes of raising crude prices to their target of $21 a barrel, said James Steel, an analyst with Refco Inc. in New York.
He said Iraq’s defeat by U.S.-led allies leaves Saudi Arabia in a commanding position among OPEC nations.
Gasoline futures were further supported by reports of a fire at a Citgo Petroleum oil refinery in Lake Charles, La., that began late Sunday and burned itself out early Monday. The extent of damage at the refinery was unknown.
Elsewhere, silver rose sharply on New York’s Commodity Exchange, extending a rally that has raised the metal’s spot price by more than 29 cents an ounce, or about 8%, since Tuesday.
Silver futures settled 8.2 cents to 10.5 cents higher, with March at $3.86 an ounce. Gold was 90 cents to $1 higher, with April at $369.50 an ounce.
