STOCKS : Dow Advances 2.73 on Hopes for Interest Cut
After three days of losses, stocks edged slightly higher Tuesday on investors’ belief that interest rates will eventually drop further.
The Dow Jones average of 30 industrials inched up 2.73 points to 2,930.45. Advancing issues narrowly outnumbered declines in nationwide trading of New York Stock Exchange-listed stocks, with 830 up, 794 down and 460 unchanged.
Big Board volume remained moderate at 167.84 million shares, versus 164.40 million Monday.
Broader market indexes were mostly stronger than the Dow. The NASDAQ composite index rose 1.70 points, or 0.3%, to 496.08.
Fueling optimism over the possibility of lower interest rates were an economic report showing persistent weakness in the economy, and remarks by Federal Reserve Board Chairman Alan Greenspan.
In testimony before the Senate Banking Committee, Greenspan said the Fed was keeping its options open regarding interest rates. He said the economy still appears to be moving lower, although there are indications that the recession will bottom out within a “reasonably short period.”
“People are seeing a little flexibility in Greenspan,” said Diego Veitia, chairman of International Assets Advisory Corp.
The Dow had dropped 76 points in recent days as bond yields climbed, on worries that the Fed was through easing credit. Greenspan’s comments Tuesday at least left the door open.
Analysts also noted that March durable goods orders, reported Tuesday, were surprisingly weak, adding to speculation that the Fed will be forced to help the economy with still-lower rates.
Among the market highlights:
* Oil stocks helped the Dow move higher, as many of the companies reported healthy first-quarter earnings. Exxon rose 3/4 to 60 7/8, Chevron gained 7/8 to 78 1/4 and Texaco added 1 1/8 to 67 3/4.
* Fleet/Norstar rocketed 3 5/8 to 21 1/2 after the bank won a bid to acquire the failed Bank of New England. Bank of Boston, whose bid was rejected, fell 7/8 to 7 5/8.
* Industrial stocks were mostly higher, despite the bearish durable goods report. Investors still see a strong recovery ahead. Alcoa jumped 1 1/8 to 68 1/8, Grace gained 1 3/8 to 30 7/8, Emerson Electric rose 1 1/4 to 46 5/8 and Eaton added 7/8 to 59 1/4.
* California auto-insurance firms Mercury General and Twentieth Century Industries plunged. Mercury lost 2 1/8 to 30 3/4; Twentieth Century dropped 2 1/4 to 41. Traders said the cause was a state Court of Appeal ruling that insurers aren’t entitled to make a profit on assigned-risk auto policies. The ruling threatens the status of an 85% average rate hike on assigned-rate policies last year, and puts the onus on the companies’ good-driver insurance operations to make up for assigned-risk losses. The court decision now puts the ball in the state insurance commissioner’s court.
* Companies that gained on favorable earnings reports included Northern Telecom, up 7/8 to 33 5/8; health-care firm FHP International, up 1 3/8 to 23 5/8, and Quaker Oats, up 1 1/8 to 56 1/4.
* Among smaller Southland companies, construction firm Kasler Corp. rose 1/2 to 18 after declaring a 3-for-2 stock split and raising its dividend. The Nicholas-Appelgate Growth Fund added 1/4 to 12 1/2 after shareholders approved conversion of the closed-end investment fund to open-ended status.
Overseas, foreign buying swept German shares higher, restoring confidence to the market. The DAX-30 average rose 25.14 points to 1,597.05. In London, the Financial Times 100 average closed 13.0 points higher at 2,503.8.
In Tokyo, stocks finished the day firmer, with the Nikkei 225-share average rising 254.56 points to 26,491.57 by the close.
In Mexico City, the Bolsa index rebounded 23,530 points to 906,776.
Credit
Bond prices posted moderate gains as enthusiasm over bad economic news was muted by continuing fears of bond oversupply.
The Treasury’s bellwether 30-year bond rose 9/32 point, or $2.81 per $1,000 in face amount. Its yield edged down to 8.27% from 8.29% late Monday.
Traders said the government’s March durable goods report lifted the bond market in early trading. The bond market was less convinced than the stock market, however, that Fed chief Alan Greenspan was hinting at lower interest rates ahead.
Also, a heavy calendar of Treasury note offerings this week, beginning today, continues to worry the market.
The federal funds rate, the rate on overnight loans between banks, fell to 5.875% from Monday’s 6%.
Currency
The dollar ended lower as dealers cashed in on the currency’s recent strength.
The dollar started out lower in Tokyo and continued in that direction in Europe after a round of central bank dollar selling led by the German Bundesbank.
Ronald H. Holzer, trader for Harris Trust in Chicago, said some dealers might have been looking for an excuse to sell dollars after the currency’s recent surge.
The dollar closed in New York at 1.741 German marks, down from 1.764 Monday. It ended at 137.635 Japanese yen, from 139.49 Monday.
Commodities
Soybean futures prices surged on the Chicago Board of Trade, erasing the previous session’s losses after a Brazilian agency slashed its forecast for that country’s 1991 soybean harvest.
Soybean futures settled 4 to 9.75 cents higher, with the contract for delivery in May at $5.9325 a bushel. Grain futures also advanced.
Elsewhere, a steep drop in gasoline futures that analysts attributed to profit taking led oil futures lower on the New York Mercantile Exchange, ahead of an industry report that showed an unexpected decline in U.S. crude stocks.
Light, sweet crude oil futures finished 27 to 44 cents lower, with June at $20.88 a barrel.
Precious metals were narrowly mixed on New York’s Comex. Gold was 80 to 90 cents lower, with April at $357.10 an ounce. Silver rose a half-cent to $3.94.
Market Roundup, D6
