Dow Rises 6.49 on Greenspan’s Rate Comments
Market Overview
Highlights of Tuesday’s market activity, compiled from Times staff and wire reports:
* The stock market settled modestly higher Tuesday in directionless trading. The Dow Jones industrial average ended 6.49 points higher at 3,251.57. The key 30-stock index traded in a narrow range of 23 points.
* Treasury bond prices closed mixed after the market was pulled in different directions by the Treasury’s auction of three-year notes and comments from Federal Reserve Chairman Alan Greenspan.
Stocks
The stock market drew support from comments by Greenspan that the central bank is prepared to ease interest rates again if the economy doesn’t come to life.
But Greenspan sowed confusion by adding that the dramatic cuts that took place in December should be enough to jump-start the economy. He was speaking at a meeting in Texas of the Independent Bankers Assn. of America.
“It was a real dance,” Hugh Johnson, a senior vice president at First Albany Corp., said of Greenspan’s comments. “I don’t think he provided the financial markets with a real answer to the question.”
Advancing issues outnumbered declining ones by about 9 to 7 on the New York Stock Exchange.
Big Board volume came to 200.15 million shares, up from Monday’s 188.03 million.
On the secondary market, the NASDAQ over-the-counter index lost 0.76 to 633.37. It had dropped 0.82 Monday.
There was little reaction to the first leg of the Treasury’s quarterly refunding, which kicked off with the auction of about $15 billion in three-year notes.
Among market highlights:
* Boeing shares dropped 1 to 47. Morgan Stanley analyst Phil Friedman cut his rating on Boeing to hold from buy and lowered his 1993 and 1994 earnings estimates due to the company’s huge backlog of deliveries. Boeing’s commercial jet backlog is more than $90 billion, and its commercial and government order backlog is $100 billion.
* Philip Morris was off 5/8 at 74 3/8. Merrill Lynch analyst Allan Kaplan cut his 1992 and 1993 earnings estimates on the company.
* MGI Pharma gained 3/4 to 11 1/2 after dropping 11 5/8 Monday. Punk, Ziegel & Knoell reiterated a buy rating on MGI based on the potential of its Salagen drug, which treats dry mouth in cancer patients.
* Goodyear Tire & Rubber gained 7/8 to 61 1/4 after reporting that its fourth-quarter earnings soared by more than $105 million from a year earlier.
* Federal Express jumped 3 1/2 to 47 3/4. Morgan Keegan analyst David Guthrie upgraded the company to accumulate from source of funds, the equivalent of a sell.
* Pfizer gained 1 3/8 to 73 7/8. Smith Barney and Bear Stearns & Co. repeated buy ratings on the company.
* SouthWest Airlines rose 1 to 37. The company said its shares climbed because it priced a 2,175,000-share offering at Monday’s close of $36 a share.
Overseas, Frankfurt’s 30-share DAX average closed up 1.42 at 1,683.55.
Stocks ended a quiet session in London barely changed. The Financial Times 100-share average was 1.3 points lower at 2,537.1.
The Tokyo stock market was closed for a holiday.
Credit
The price of the Treasury’s bellwether 30-year bond rose 1/16 point, or about 63 cents per $1,000 in face amount. The yield, which falls when the bond’s price rises, slipped to 7.78% from 7.79% Monday.
Prices of short-term securities closed lower.
Bond prices slipped before the Treasury’s afternoon auction, as is often the case when the market is faced with a fresh supply of new issues.
The auction results were about as expected, showing relatively weak demand for the $15 billion worth of three-year notes. The results did little to improve prices.
The market was more interested in Greenspan’s comments.
“Greenspan is on the fence and has managed to accomplish putting everyone else on the fence,” said Anthony Chan, a senior economist at Barclays de Zoete Wedd Securities Inc.
In any case, economists don’t expect any action by the central bank on interest rates until Friday at the soonest, one day after the debt-refunding auction ends.
The bond market has been looking for another rate cut since Friday, when the release of weak job data for January raised the hope that a rate could would be used to stimulate the economy.
However, the Fed signaled Tuesday that it would not ease rates anytime soon.
The federal funds rate, the interest charged on overnight loans between banks, fell to 3.73% from 3.87% Monday.
Currency
The dollar closed higher as expectations of an imminent cut in interest rates subsided.
Currency market analysts said Greenspan’s comments helped puncture speculation that the Fed would nudge rates lower.
The dollar gained more than 2 cents against the British pound and nearly 2 pfennigs against the German mark on Greenspan’s remarks.
Financial markets had expected the central bank to push rates down after the Labor Department issued the bleak employment report Friday. The government said the economy lost another 91,000 jobs in January.
In New York, the dollar closed at 1.597 German marks, up from 1.577 Friday, and at 127.55 Japanese yen, up from 126.70. The British pound slipped to $1.797 in New York from $1.819.
Commodities
Fuel futures fell on the New York Mercantile Exchange in edgy trading ahead of today’s meeting in Geneva of the Organization of Petroleum Exporting Countries.
Meanwhile, wheat futures prices plunged their daily limit of 20 cents a bushel on the Chicago Board of Trade as the speculative fever that drove prices to an 11-year high suddenly broke.
On other commodity markets, livestock and meat futures were mixed, and precious metals were mixed.
The OPEC ministers are expected to consider cutting crude production to boost prices. Analysts said the market has already factored in a 5% cut.
Light sweet crude oil for March delivery fell 50 cents to $19.28 a barrel; heating oil dropped 1.39 cents to 55.20 cents a gallon; unleaded gasoline sagged 1.71 cents to 57.07 cents a gallon, and March natural gas fell 6.6 cents to $1.13 per 1,000 cubic feet.
Precious metals were little changed in light trading on New York’s Commodity Exchange. Gold rose 40 cents to $356.30 an ounce. March silver slipped 1.5 cents to $4.183 an ounce.
Market Roundup, D8
