STOCKS : Dow Up 4.47 as Investors Await Inflation News
Stocks inched higher Wednesday, with smaller issues leading the blue chips, as investors awaited a big batch of economic indicators.
The Dow Jones industrial average rose 4.47 points to close at 2,987.03. The Dow spent most of Wednesday in minus territory before moving marginally higher in the afternoon.
In the broader market, declining stocks led gainers 800 to 731 on the New York Stock Exchange. Big Board volume came to 148.09 million shares as of 4 p.m., up from 143.39 million Tuesday.
August wholesale price figures will be released today, and the August consumer price report is due Friday. Economists expect a moderate 0.3% rise in both reports.
Investors’ underlying bullishness about stocks may depend on a continuing low inflation trend, analysts say. A surge in inflation could knock the bond market and spark a broad drop on Wall Street, where the Dow has mostly held around 3,000 since mid-July.
As long as inflation remains low, investors are likely to be patient with the struggling economy and the wait for improving corporate profits, many experts say.
Even so, as the economy recovers, “The upturn will be nothing like we’ve had in the past,” said Allen Sinai, economist at Boston Co. “We’re crawling out of a hole.”
Wednesday, small stocks fared better than blue chips, with the NASDAQ composite index posting a 0.7% gain, compared to the Dow’s rise of 0.2%. That has been the trend all year, and it is likely to continue, Sinai said. “They (small companies) have better growth prospects. . . . They have more leeway to control costs.”
Among the market highlights:
* Boeing fell 1 1/8 to 50 and McDonnell Douglas lost 2 to 54 1/8 after American Airlines said it is substantially cutting its spending over the next couple of years. That raised fears of canceled jet orders.
Meanwhile, airline stocks soared on the news on the hope that lower spending will boost profits. AMR, American’s parent, jumped 3 1/8 to 59. UAL, parent of United, gained 2 to 129 1/2, Delta rose 2 1/4 to 65 7/8, and USAir rose 1/2 to 11 3/4.
* U.S. Healthcare rose 1 3/4 to 23 5/8. The health maintenance organization, whose stock has plunged in recent weeks with other HMOs, said it may buy back up to 7% of its stock. Elsewhere, United Healthcare jumped 2 1/8 to 45. Salomon Bros. raised its 1991 and 1992 estimates on the company.
* Tenneco lost 2 1/4 to 40 3/8. The company cut its dividend 50% and said it expects a substantial loss in the second half due to deterioration at its J. I. Case farm machinery unit. Case’s competitor, Deere, leaped 2 to 52 5/8 on the news.
* Drug firm Marion Merrell Dow soared 3 to 36 3/4 on speculation over what action Dow Chemical would take at a board meeting concerning its stake in Marion.
* Intel gained 1 to 48 3/4. It introduced new personal-computer networking products. Smaller competitors in networking fell on the news, including Western Digital, off 1/4 to 3 1/8, and 3Com, off 3/8 to 8.
* Troubled Torrance-based retailer Standard Brands Paint lost 1/8 to 4 1/2, its 52-week low, after reporting an operating loss of 23 cents a share in the second quarter. Sales fell 9%.
Overseas, Japanese stocks ended mixed. Tokyo’s Nikkei average rose 93.21 points to 22,504.79. In Frankfurt, the DAX average ended 0.93 points lower at 1,628.19. In London, the Financial Times 100-share average lost 4.2 points to 2,626.6.
Credit
Treasury bond prices slipped ahead of inflation figures that traders feared would make the Federal Reserve less likely to ease interest rates this week.
The price of the Treasury’s 30-year bond was down 1/8 point, or $1.25 per $1,000. Its yield edged up to 8.01% from 8.00% Tuesday.
The Fed had been widely expected to cut short-term interest rates after the release of a weak unemployment report last Friday, but the lack of a Fed ease so far has begun to push bond yields back up.
Doubts that the Fed would act were further stoked on Wednesday by the belief that the inflation reports due today and Friday, while expected to be moderate, won’t be low enough to provoke lower interest rates.
The federal funds rate, the interest on overnight loans between banks, was quoted at 5.438%, unchanged from late Tuesday.
Currency
The dollar rose abroad but ended lower in U.S. trading, weakened by traders’ worries about the direction of U.S. interest rates.
In New York, the dollar fell to 1.688 German marks, down from 1.694 Tuesday. It also fell to 134.65 Japanese yen, down from 134.75.
Dollar traders have been bucking the expectations of U.S. bond traders in recent days: While bond investors are less sure that interest rates are going down, dollar traders seem sure the Federal Reserve will soon ease credit again.
Commodities
Persistent rumors that the Soviet Union is dipping into its gold reserve to buy food sent grain and gold markets into high gear.
Gold futures hit a 14-month low on the Commodity Exchange in New York before recoving some of their losses. (Story, D1.) Meanwhile, soybeans and grain futures advanced.
Soybean futures prices posted strong gains on the Chicago Board of Trade on the assumption that if the Soviet Union is trading gold for dollars it will buy large amounts of soybean meal for livestock feed.
The September soybean contract rose 8 cents to $5.81 a bushel.
Soybean prices also were helped by a private forecast for a smaller U.S. crop than had been expected.
Elsewhere, oil prices rallied in late trading. Light sweet crude oil for delivery in October settled at $21.64 a barrel, up 23 cents, at the New York Merc.
Market Roundup, D6
