STOCKS : Bond Market Helps Push Dow Up 14.98
Stocks meandered to a higher close Thursday, encouraged by gains in the Treasury bond market but weighed down by jitters over second-quarter earnings.
The Dow Jones industrial average rose 14.98 points to 2,959.75.
“The bad news is that the quality of the rally is pathetic,” said Stan Weinstein, editor and publisher of the Professional Tape Reader.
Evidence of lack of investor confidence was the slim lead that gainers held over losers--844 to 609--and the moderate New York Stock Exchange volume: 157.7 million shares.
Stocks were nonetheless encouraged by a half-a-point jump in the benchmark 30-year bond, which pushed market interest rates lower, and by computer-activated buy programs.
“The market went up on programs and went down on programs,” noted Jack Solomon, a technical analyst at Bear Stearns. “The bonds were the feature today.”
President Bush’s announcement Wednesday that he will appoint Federal Reserve Chairman Alan Greenspan to another four-year term failed to help the market.
“Most people were expecting he would be reappointed,” said Peter Davies, a vice president at Nomura Securities.
Trading was choppy as investors digested second-quarter earnings, trying to determine the strength of corporate America after almost a year of recession.
“We’re seeing aimless, very random price movements,” said Donald Selkin of Prudential Securities. “The market’s haphazardly going no place fast.”
Highlights included:
* CPC International sank 2 3/4 to 83 3/4. Prudential trimmed its 1991 and 1992 estimates after the company reported weaker-than-expected second-quarter earnings.
* Eli Lilly slipped 1 1/8 to 71 1/2. Traders said Morgan Stanley lowered its earnings estimates on the company.
* Kmart rose 1 to 46 5/8. Bear Stearns initiated a buy rating, saying it expects the retailer to regain market share with its remodeled and renovated stores.
* Federal National Mortgage was up 1 1/2 to 53 3/8. Smith Barney raised its 1991 and 1992 estimates on the firm, traders said. Fannie Mae posted strong second-quarter results Wednesday.
* Westmark International slumped 3 1/2 to 39 1/2. Shearson cut its 1991 and 1992 estimates, traders said.
* Alza lost 2 to 57 3/4. Merrill cut its rating to neutral from above average and cut earnings estimates, traders said.
* Genzyme rose 2 5/8 to 35 7/8 after Shearson Lehman recommended it.
* Consolidated Rail added 2 to 63 1/4. Paine Webber reaffirmed its buy rating, saying the firm could report higher-than-expected income next week.
Overseas markets were mixed. In Japan, the 225-share Nikkei average eased 183.38 points to 22,937.92. In London, the 100-share Financial Times index rose 2.1 points to 2,510.5. In Frankfurt, Germany, the 30-share DAX index was up 3.11 to 1,637.85.
Credit
Bond prices moved higher in the wake of the reappointment of Federal Reserve Chairman Alan Greenspan.
The Treasury’s bellwether 30-year bond rose 1/2 point, or $5 per $1,000 in face amount. Its yield fell to 8.46% from 8.51% Wednesday.
The reappointment of the 65-year-old Greenspan, announced after financial markets closed Wednesday, reassured bond investors that the Fed will continue to battle inflation. A rise in inflation erodes the value of fixed-income securities such as bonds.
Also helping the bond market was a strong auction Wednesday of $9 billion in seven-year notes.
The federal funds rate, the interest on overnight loans between banks, was 5 7/8%, up from Wednesday’s 5 1/4%.
Currency
The dollar soared against the German mark and other currencies in response to a rosy U.S. jobless report and to news that Germany would not immediately raise interest rates.
Currency traders said they were relieved over the German central bank’s decision on interest rates. Currency markets had been awash with intense speculation that the Bundesbank might take drastic steps to hold the line on inflation.
The dollar initially fell when the Bundesbank’s policy-making council said it will move to tighten monetary policy. But the reaction was more than offset by a subsequent announcement that the bank would forgo an immediate rate hike.
In New York, the dollar jumped more than two pfennigs to 1.8345 German marks, up from 1.8130.
Further bolstering the greenback was a government report of a sharp decrease in the number of Americans filing for state unemployment insurance in the last week of June. Claims fell to 388,000 in the week ending June 29 from the previous week’s 423,000, the Labor Department reported.
In addition, traders said the dollar was supported by unconfirmed rumors that the United States was considering an air strike against Iraq in retaliation for the recent discovery that Saddam Hussein has far greater nuclear capability than U.S. officials first believed.
The dollar is considered a safe harbor in times of turmoil.
The dollar closed at 138.65 Japanese yen in New York, slightly more than Wednesday’s 138.59 yen.
The British pound fell to $1.6045 from $1.6223.
Other dollar rates in New York, compared to Wednesday, included 1.5900 Swiss francs, up from 1.5710; 6.2175 French francs, up from 6.1520; 1,363.00 Italian lire, up from 1,350.00, and 1.1483 Canadian dollars, up from 1.1481.
Commodities
Prices of grain and soybean futures closed mostly lower on the Chicago Board of Trade amid forecasts for more rain this week in the Midwest.
About two-thirds of the country’s prime corn and soybean territory is expected to receive half an inch to three-quarters of an inch of rain by Saturday, said Victor Lespinasse, assistant vice president in the grain trading division of Dean Witter Reynolds Inc.
The National Weather Service has forecast a return to hot, mostly dry conditions in the Midwest next week, but “one week we can take,” Lespinasse said.
Grain futures were also pressured by signs that banks are balking at lending the Soviet Union money to buy grain. The United States has offered to guarantee $1.5 billion in such loans, but lenders still would be exposed for 2% of the credit.
At the close, wheat futures were 1 1/4 to 4 1/2 cents lower, with the contract for delivery in July at $2.61 a bushel; corn was 1 cent to 1 3/4 cents lower, with July at $2.27 a bushel; oats were unchanged to 1 1/2 cents higher, with July at $1.19 1/2 a bushel, and soybeans were 4 to 5 1/4 cents lower, with July at $5.21 1/2 a bushel.
Oil prices eased in lifeless trading on the New York Mercantile Exchange that snapped a four-day rally. Light sweet crude for delivery in August settled at $21.29 per barrel, down 14 cents.
Gold fell $2.20 an ounce to $367.80 on New York’s Commodity Exchange. Silver dropped sharply to $4.335, down 8.8 cents from Wednesday.
