Dow Up 22.94 on Good Economic News : Market Overview
Stock prices rebounded from last week’s setback with a mild rally, but activity was subdued as traders kept an eye on real estate credit conditions. The Dow Jones average, down 16.32 points last week, rose 22.94 points to 3,376.03.
Bond prices were little changed in extremely light trading.
Stocks
Most of the gains came in the morning hours, after a rally in the Japanese market. Stocks also were higher in London.
The U.S. market slipped on Friday, partly on fears that the bankruptcy filing by real estate developer Olympia & York would unsettle bank issues and the market in general.
But investors were relatively calm about the news. Analysts also said the market benefited from recent economic reports pointing to a slow but steady recovery from the recession without any evidence of resurgent inflation.
“A low-inflation and slow-growth economy is an excellent environment for both stocks and bonds,” said Jay Donnaruma, an analyst at First Albany Corp. in Albany, N.Y.
In the broader market, advancing issues outnumbered declining ones by about 3 to 2 on the New York Stock Exchange.
Big Board volume came to 151.38 million shares, down from 208.84 million at the same point Friday and the lightest total in five weeks.
Among the market highlights:
Walt Disney advanced 1 1/2 to 39 5/8 after the company’s 4-for-1 stock split. Analysts said the company will benefit from good attendance at Euro Disneyland and noted some enthusiasm for its new “Encino Man” movie.
First Florida Banks jumped 13 7/8 to 45 3/8. It will merge with Barnett Banks, which slipped 3 1/4 to 36, in a stock swap.
Deere & Co. eased 1 3/4 to 44 1/2 after Smith Barney downgraded the company.
Money-center bank stocks were mixed as traders assessed the Olympia & York situation. Citicorp fell 1/4 to 19 3/8; Chase Manhattan dropped 5/8 to 28 3/4, and BankAmerica was down 7/8 at 48. But J. P. Morgan rose 5/8 to 55 5/8, and Chemical Banking added 1/8 to 37 5/8.
Hewlett-Packard dropped 3 to 74 3/8. The company reported higher quarterly earnings, but also said it was concerned about near-term performance because of uncertainty over the economic recovery and sluggish conditions overseas.
McDonnell Douglas tumbled 4 5/8 to 43 1/2.
In overseas trading, stocks closed sharply higher in Germany, Japan and Britain.
Shares rose to a 10-week high in Frankfurt, with the DAX average adding 34.36 points, or 2%, to close at 1,758.43.
Tokyo’s 225-share Nikkei average jumped 368.83 points, or 2.04%, to 18,443.10.
London’s Financial Times 100-share average was up 21 points at 2,703.6.
Credit
The price of the government’s 30-year bond rose 1/32 point, or 31 cents per $1,000 in face amount. Its yield was 7.81%, unchanged from Friday.
Traders were hesitant to enter the market in advance of an important meeting today of the Federal Reserve Open Market Committee in Washington, and a report on the housing market.
Given the uninspiring nature of the economic recovery, many economists expect the Fed to move to lower interest rates soon, though probably not today, said Michael Moran, chief economist at Daiwa Securities America Inc.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.813%, down from 3.875% late Friday.
Currency
The dollar settled lower in quiet domestic trading, pressured by events overnight in Europe.
Analysts said the dollar’s biggest moves occurred overnight in Asian trading. The currency sold on the heels of the surprise wage agreement reached between the powerful IG Metall metal workers union and employers in Germany.
“That really strengthened the German mark against the dollar,” said Andrew Busch, a trader with Harris Trust & Savings Bank in Chicago.
The dollar closed in New York at 1.595 German marks, down from 1.611 late Friday.
After heavy selling in foreign markets, the dollar held to a relatively narrow range when trading shifted to domestic markets, Busch said.
In New York, the dollar settled at 128.75 Japanese yen, down from 129.80 yen on Friday.
The British pound rose to $1.837 from Friday’s $1.822.
Commodities
Soybean traders, worried about the possibility of drought, bid bean futures prices nearly a dime higher on the Chicago Board of Trade.
On other markets, livestock and meat futures were mostly higher, energy futures were mostly lower, and precious metals were mostly up slightly.
Soybeans for delivery in May advanced 9.5 cents a bushel to $6.195; May wheat was 3.75 cents higher at $3.843 a bushel; May corn was 1 cent lower at $2.58 a bushel; May oats were 1 cent higher at $1.46 a bushel.
Elsewhere, light, sweet crude oil for delivery in June settled 17 cents lower at $20.52 a barrel on the New York Mercantile Exchange, erasing gains posted on Friday.
Precious metals futures were up slightly on the Commodity Exchange in New York, with June gold advancing 20 cents to $338.90 an ounce, and July silver was unchanged at $4.102 an ounce.
Market Roundup, D8
