Fed Moves Hint Rate Cut Near; Dow Adds 9.84 : Market Overview

Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:

* The Dow Jones industrial average, up 57.02 points in the past two sessions, rose 9.84 points to 3,071.78. That left the Dow just short of its record closing high of 3,077.15 reached on Oct. 18.

* Smaller stocks continued to outpace the Dow, reaching new all-time highs.

* Yields on most Treasury bills and bonds fell again, as the Federal Reserve announced actions that many traders saw as credit-easing by the central bank.

Stocks

Stocks staged another advance in erratic trading, as investors continued to place greater importance on the good news of falling interest rates rather than on the bad news of a struggling economy.

Rising issues outnumbered losers by about 3 to 2 on the New York Stock Exchange, and volume rose to 200.79 million shares, against 192.81 million Tuesday.

The NASDAQ composite index of small stocks jumped 6.81 points, or 1.3%, to close at a new high of 541.32, up from the previous record of 540.94 set Oct. 16.

Though Wall Street has repeatedly underestimated investors’ appetite for stocks this year, some bearish analysts believe that the red-hot market could suffer a setback soon, if upcoming economic reports point to another recession. October unemployment data, for example, will be released Friday.

Wednesday, the Federal Reserve appeared to lower interest rates in the money markets, as had been predicted after a gloomy consumer-confidence report out Tuesday. The Fed is under pressure from the White House to help bolster the economy by cutting interest rates again.

Among the market highlights:

* Financial stocks were among the stars, as interest rates eased. Lower rates would help many banks, insurers and other financial companies. Federal Home Loan Mortgage rose 3 1/8 to 109 1/4, First Financial Management gained 2 1/2 to 43 1/4, mutual-fund firm Dreyfus soared 2 5/8 to 39 1/4, and Aetna Life was up 2 to 39 5/8.

* Indianapolis bank Merchants National jumped 9 1/4 to 38 1/4 after it agreed to merge with Cleveland’s National City in an exchange of stocks. National City tumbled 3 1/8 to 36 5/8 on earnings-dilution fears.

Other Midwest bank stocks rose on the news, as merger talk heated up again. INB Financial added 2 3/4 to 31 1/4, Mercantile Bancorp added 1 1/2 to 37, and Banc One rose 1 to 45 3/4.

* Software stocks were among the day’s leaders, perhaps helped by expectations of new product rollouts. Autodesk soared 4 1/2 to 44 1/2, Borland jumped 3 3/8 to 57 5/8, Microsoft rose 3 3/4 to 94 1/2, and Adobe Systems gained 2 1/4 to 54 1/2.

Among other techs, computer networker Novell jumped 3 1/8 to 49. It will be added to the Standard & Poor’s 500 index.

* Chrysler rose 1 5/8 to 12 3/4 after it reported a smaller-than-expected 1991 third-quarter loss.

* Mirage slumped 2 to 22 1/2 one day after the casino firm announced a new mega-project for Las Vegas. Among competitors, Circus Circus lost 7/8 to 33 1/4, and Caesars World gave up 1 3/8 to 31.

* Kellogg dropped 3 to 102 1/4. The cereal company’s chairman-elect, Arnold Langbo, told analysts that he sees low double-digit profit growth ahead. Kidder Peabody cut its rating on the company.

* Oxnard-based Benton Oil slipped 1/8 to 13 3/8. The company said it will sell 3 million new shares to pay off debt. There are 10.2 million shares outstanding.

Overseas, London stocks gained, with the Financial Times 100-share average rising 23.8 points to 2,577.1. In Frankfurt, the DAX average lost 7.92 points to 1,582.83.

Tokyo stocks moved aimlessly in weak trading. The Nikkei average fell 159.43 points to 24,981.18.

Credit

Yields on most short- and long-term Treasury bonds inched lower as the Federal Reserve allowed the benchmark federal funds bank-lending rate to slip below a previous target of 5.25%.

The Fed also made an unusual pre-announcement that it planned to make overnight “system repurchases” today, adding cash to the banking system and thus pushing the cost of money down.

Both moves seemed to confirm what the market has recently taken as a foregone conclusion: That the Fed must cut rates again to help the economy. However, some economists maintained that the Fed’s moves were largely technical, not a true easing.

While most T-bond yields slipped, the yield on the bellwether 30-year bond remained firm, inching up to 7.90% from 7.89% Tuesday. That yield has plunged from 8.09% late last week.

The bond market may have been hesitant because of the Treasury’s announcement of its quarterly bond sale. The Treasury will sell a total of $38 billion in three-year, 10-year and 30-year securities next Tuesday through Thursday. The size of the offering was expected.

Currency

The dollar fell in early trading amid pessimism about the U.S. economy, then was bashed again as the Federal Reserve let money market rates decline.

The dollar closed down against all major currencies except the Japanese yen, which has been hurt by fears that the new Japanese government might also cut rates.

The dollar closed at 1.671 German marks in New York, compared to 1.686 Tuesday. It rose slightly against the yen, to 131.00 from 130.65 Tuesday.

Commodities

Prices of orange juice futures rose sharply in thin trading on the New York Cotton Exchange. The rally wasn’t prompted by fresh news, but some analysts said it could augur higher prices.

Frozen concentrated orange juice for November delivery rose 3.1 cents to $1.665 a pound.

Surging gasoline futures sent the oil market on a wild ride on the New York Merc, but prices eased in the afternoon to finish with little change. December deliveries of light, sweet crude oil finished unchanged at $23.11 a barrel.

Precious metals edged lower on New York’s Comex, with December gold slipping 60 cents to $360.50 an ounce; December silver fell 0.2 cent to $4.11.

Market Roundup, D8