FINANCIAL MARKETS : STOCKS : Dow Up 12.38; Interest Rate Hopes Credited
Blue chip stocks ended slightly higher Monday despite a tech-stock selloff, as many investors continue to bet on lower interest rates.
The Dow Jones average of 30 industrials rose 12.38 points to 2,933.17.
In the broader market, advancing issues outnumbered declines in nationwide trading of New York Stock Exchange-listed stocks, with 931 up, 683 down and 465 unchanged. NYSE volume was moderate at 161.80 million shares, down from Friday’s 198.61 million.
The Federal Reserve drained cash from the banking system Monday, the opposite of what one would expect if the Fed intended to lower interest rates to help the economy. But many investors believe that the Fed will be forced to act soon, as the recession lingers.
“They’re not giving up on the Fed cutting the discount rate sometime this week,” said Robert Kahan, trader at Montgomery Securities.
Still, the market’s tone was weak for much of the day, as many technology stocks tumbled after Apple Computer reported its second-quarter net profit was $1.07 a share, versus $1.04 a year earlier. The weaker-than-expected earnings sent Apple’s stock plunging 9 1/2 to 62 1/4 in NASDAQ trading, Even though Apple had been saying for some time that its margins would suffer as it pushes for greater computer market share.
But the market rebounded in the afternoon, which many analysts attributed to widespread optimism on the economy’s direction and buying by new investors.
Helping the market Monday was strength in financial stocks. Chase Manhattan reported that its first-quarter profit nearly tripled to $117 million. The bank attributed its stronger performance to its recent cost-cutting plan and higher revenue from its basic banking services. Chase’s stock jumped 1 3/8 to 19.
Among the market highlights:
* Tech stocks suffering with Apple included IBM, off 1 5/8 to 106 7/8; Compaq, off 1 7/8 to 61 3/8; AST Research, down 2 to 30 1/4; and Data General, off 1 1/8 to 14 1/4.
But Tandon Corp. bucked the trend, rising 1/2 to 3 15/16 in active trading. And software giant Microsoft rebounded 6 1/2 to 113 3/4 following its recent drubbing.
* Financial stock winners following Chase higher included Chemical Banking, up 7/8 to 19 5/8, and BankAmerica, up 3/4 to 37 3/8. Financial services firm Primerica jumped 1 1/8 to 32 3/8 on a strong earnings report, and Merrill Lynch gained 1 1/8 to 39 1/2 on expectations of a good first quarter.
* The Dow index was helped by strength in metal and oil stocks. ALCOA jumped 3 1/8 to 65 3/8, following competitor Reynolds Metals higher. Reynolds rose 1 5/8 to 57 1/4 after forecasting “significantly improved” results for the rest of 1991.
* Health-care stocks were mixed. Santa Barbara-based Mentor Corp. plunged 6 7/8 to 19 3/8, a 26% loss, after the FDA approved the firm’s incontinence drug for men but not for women. The company said it still expects to get approval for women, who make up two-thirds of the target market.
Elsewhere, Bristol-Myers Squibb fell 1 3/4 to 77 5/8 on reports that scientists have linked breast implants and a chemical that causes liver cancer in lab animals.
Irvine-based Birtcher Medical lost 1 to 12 3/4 after it and Cabot Medical dropped plans to merge. The firms gave no reason. Birtcher said it instead will proceed with a 1.5-million-share offering.
* Biospherics, a biotechnology firm, plunged 11 to 12 1/4 in NASDAQ trading. Traders attributed the decline to a negative news report in Barron’s about Biospherics’ sugar substitute patent.
* Tonka slid 7/8 to 4 3/4 after Hasbro said it wants to cut its takeover offer to $5 a share from $7. Hasbro would, however, boost its offering price for Tonka’s junk bonds at the same time. Hasbro fell 1/4 to 26.
Overseas, Germany’s 30-share DAX average jumped 18.28 points to 1,601.42. London’s Financial Times-100 stock average closed up 16.7 points at 2,542.8, and Japan’s 225-share Nikkei average rose 113.03 points to 26,695.53.
Credit
Long-term bond prices rose as traders digested news of disappointing April auto sales--showing new economic weakness. Traders ignored the Fed’s signal that it was not yet relaxing monetary policy.
The Treasury’s bellwether 30-year bond rose 7/32 point, or $2.19 per $1,000 in face amount. Its yield, which moves in an opposite direction from price, slipped to 8.13% from 8.15% late Friday.
The federal funds rate, the interest on overnight loans between banks, settled at 7%, up from 5% late Friday.
Currency
The dollar fell against other major currencies amid expectations of lower U.S. interest rates.
In New York, the dollar slumped to 1.671 German marks from Friday’s 1.688. It also fell to 134.25 yen, down from 136.40 Friday.
Commodities
Grain and soybean futures seesawed to a moderately lower close in Chicago, as hopes for new Soviet purchases of U.S. grain waxed, then waned.
Elsewhere, light sweet crude oil futures settled 28 to 46 cents higher, with May at $21.91 a barrel.
Gold edged higher on New York’s Commodity Exchange, settling 30 to 50 cents higher, with April at $361.60 an ounce. Silver for April gained 0.4 cents to $3.98.
Market Roundup, D10
