FINANCIAL MARKETS : STOCKS : Dow Up 8.41 as Glow of Interest Rate Cut Wanes
Blue chip stocks closed slightly higher in moderate trading Thursday as investors stepped back to catch their breath after this week’s upturn on a round of interest rate cuts.
The Dow Jones average of 30 industrials climbed 8.41 to 2,938.61, extending its gain over the past three sessions to 61.63 points.
In nationwide trading of New York Stock Exchange-listed stocks, advancing issues totaled 951, 615 issues declined and 498 were unchanged.
Big Board volume totaled 187.09 million shares, up from 181.90 million in the previous session.
The market made its strongest rally early in the day, bolstered by fresh enthusiasm over this week’s prime rate cuts by commercial banks, which investors hope will pump life into the sick economy.
The Federal Reserve lowered its discount rate for loans to member banks to 5.5% from 6% Tuesday. The Fed also lowered its federal funds rate target. Major banks then eased their prime rates, reducing the cost of loans to their best commercial customers by half a percentage point to 8.5%.
“The thrill of the discount rate cut wears thin,” said Jack Solomon, a Bear Stearns & Co. technical analyst. “I think we’ll return to concern about earnings and whether the recession will be dragged out.”
Analysts said the market was also gearing up for today’s report on April unemployment--a key reading of the economy’s health last month.
The new issue of Duracell International was the most active NYSE stock, ending unchanged at 20 3/4.
“Duracell is partly catching a wave of initial public offering enthusiasm,” said Securities Data analyst Mark Basch. “But people also are thinking it’s pretty sound fundamentally and won’t be highly leveraged . . . like other new listings.”
Among the markets highlights:
* Amgen Inc. soared 4 1/2 to 133 3/4 after reporting a sharp jump in fourth-quarter profit. Analysts raised ratings and earnings estimates on the biotech company.
* Alcoa climbed 1 to 71 as lower interest rates inspired investors to shift money into the cyclical industry in anticipation of an economic recovery.
* Apple Computer, which slid 7 3/4 Wednesday after forecasting weak third-quarter earnings, rose 1 3/4 to 49.
* Elsewhere in the technology group, IBM rose 1 7/8 to 105 7/8, Storage Technology jumped 3 1/4 to 41 3/4, Compaq Computer rose 7/8 to 49 3/4, Lotus Development added 2 1/2 to 33 1/4 and Sun Microsystems climbed 1 1/4 to 36 7/8. But Hewlett-Packard fell 1 1/2 to 47 5/8. Mabon Securities urged clients to take profits, citing concerns about the strong dollar’s possible impact on its results.
Foreign markets were mixed, with German and British shares rising and Japanese stocks falling. Germany’s 30-share DAX average gained 24.26, or 1.5%, to close at 1,630.04, its highest finish since Aug. 30. In London, the Financial Times 100-share average closed 22.3 points up at 2,530.7. Japan’s 225-share Nikkei average fell 11.14 to 26,477.86.
Credit
Continued high numbers of workers filing new unemployment claims and expectations of a dreary employment report pushed bond prices higher.
The Treasury’s bellwether 30-year bond rose half a point, or $5 per $1,000 in face amount. Its yield fell to 8.12% from 8.17% late Wednesday.
New unemployment claims rose by 2,000 in the week ended April 20, bringing the total to 500,000. Although the increase was slight, the total has been hovering at half a million--a level the credit market took as a sign of persistent recession.
“I think they’re thinking that tomorrow’s unemployment report is going to be weak and that weakness is going to hold interest rates down for a while,” said Carol A. Stone, senior economist at Nomura Securities International Inc.
Bond prices were also supported by the lower interest rates.
“The predominant view at the moment is if the economy is really this weak, maybe inflation and interest rates can stay low,” Stone said.
In the corporate bond market, meanwhile, companies sold more than $2.5 billion in notes and bonds, the highest single-day total since Feb. 1, according to Securities Data Co.
The Fed’s decision to lower the discount rate, the rate it charges banks, and its target for the fed funds rate has spurred a new rush by corporations to take advantage of lower borrowing costs.
Also Thursday, the government auctioned off $11.81 billion in new one-year bills at an average discount rate of 5.71%, the lowest since March, 1987. The bills will carry an equivalent coupon interest rate of 6.07%.
The fed funds rate, the interest on overnight loans between banks, fell to 5.688%, down from 5.75% late Wednesday.
Currency
The dollar rose against most key currencies in thin trading as the currency markets also waited for the latest U.S. unemployment data.
Currency dealers attributed the dollar’s increase largely to the German Bundesbank’s decision not to raise interest rates at its biweekly policy-making meeting. Higher German rates would have strengthened the mark at the dollar’s expense.
The U.S. currency, which fell sharply this week after the Federal Reserve cut interest rates, rebounded in New York to 1.7293 marks, from 1.7100 at Wednesday’s close.
The dollar closed unchanged against the Japanese yen at 138.15 yen.
Other late dollar rates in New York, compared to late Wednesday’s quotes, included 1.4585 Swiss francs, up from 1.4480; 5.8255 French francs, up from 5.7885; 1,274.00 Italian lire, up from 1,266.00, and 1.14955 Canadian dollars, down from 1.15175.
Commodities
Prices of coffee futures fell sharply on New York’s Coffee, Sugar & Cocoa Exchange as speculators registered doubt that an international meeting will produce any movement toward a price-support agreement.
On other commodity markets, oil futures fell; precious metals were mixed; livestock futures were lower while pork bellies rose, and grains and soybeans were mixed.
Coffee futures finished 1.15 to 1.75 cents lower, with the contract for delivery in May at 86.65 cents a pound.
Analysts said the main sellers were speculative commodity funds.
Crude oil futures ended modestly lower on the New York Mercantile Exchange after sliding from early highs in lackluster trading. Light sweet crude settled 9 cents lower, with June at $21.17 a barrel.
Gold futures edged lower on New York’s Commodity Exchange, losing $1 to finish at $355 an ounce.
Market Roundup, D6
