Dow Up 10.89 on Blue Chip Rally; New Oil Price High : Market Overview
Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:
* Oil prices rose to new closing highs for 1992 as traders responded to a report showing U.S. stockpiles fell last week. Light, sweet crude oil for delivery in July settled at $22.43 per barrel, up 32 cents, at the New York Mercantile Exchange.
* Energy and auto issues led a mild rally in blue chips as the stock market steadied after Tuesday’s late decline. The Dow Jones average, down 17.11 points Tuesday, rose 10.89 to 3,406.99.
Commodities
Oil prices have been advancing lately amid indications that Saudi Arabia, the world’s most influential petroleum exporter, has reversed its longtime policy favoring moderate prices and now wants prices to go up.
Oil’s previous closing high price for the year was $22.11, set Friday.
On other markets, wheat futures moved sharply higher; livestock and meat futures were higher, and precious metals declined.
OPEC recently agreed to hold its spring production levels fairly steady in the summer, when demand for oil rises. That could prop up the per-barrel price, analysts said.
Traders were given additional motivation to buy oil after the American Petroleum Institute reported Tuesday evening that the U.S. supply of crude oil fell by 4.6 million barrels last week, a sizable drop.
Futures contracts for refined petroleum products also rallied Wednesday to new closing high prices for the year.
Unleaded gasoline for delivery in July settled at 67.31 cents a gallon, up 1.52 cents. Home heating oil for delivery in July settled at 60.81 cents a gallon, up 0.43 cent.
Meanwhile, the June gold delivery was 60 cents lower at $338.70 an ounce, and July silver was 1.5 cents lower at $4.068 an ounce at the Commodity Exchange in New York.
Stocks
The Dow traded just above and below the 3,400 level for much of the day, but a recovery in bond prices in the afternoon lifted sentiment enough to spur more buying, traders said.
Advancing issues and declines ran about even in the daily tally on the New York Stock Exchange. Big Board volume totaled 215.79 million shares against Tuesday’s 203.08 million.
Analysts said investors were cautious about chasing after stocks, given the market’s recent choppy performance.
But economic statistics continued to provide evidence of a strengthening economy. The Commerce Department reported that factory orders rose 1.0% in April for their fourth consecutive monthly gain, and inventories shrank.
Signs that the recovery might be gathering momentum have lately spurred buying in cyclical stocks such as the auto group.
Alan Greenspan, chairman of the Federal Reserve Board, meanwhile said the pickup in business activity did not appear to have posed a threat of revived inflation.
* Energy stocks chalked up broad gains as oil prices rose on word of reduced crude oil inventories. Exxon added 1 1/2 to 62 7/8; Texaco 7/8 to 64 3/8; Atlantic Richfield 7/8 to 114 7/8; Amoco 1/2 to 49 1/4, and Chevron 3/8 to 71 3/8.
In the oil field service and drilling sector, Schlumberger gained 2 3/8 to 67 1/2; Halliburton added 5/8 to 29 3/4, and Baker Hughes edged up 1/2 to 23 3/4.
Among other market highlights;
* General Motors climbed 1 1/4 to 41 3/4; Chrysler 1/2 to 19 7/8, and Ford Motor 5/8 to 46 3/4 as the manufacturers posted better-than-expected domestic car sale results for late May.
* Bristol-Myers Squibb lost 1/2 to 66 3/8 in active trading on top of a 6 7/8-point drop Tuesday, when the company said its second-quarter earnings would fall short of expectations.
* Egghead Inc., traded in the NASDAQ system of the over-the-counter market, fell 1 1/4 to 20 1/4. Advanced Telecom rose 2 1/2 to 22 1/2, and LDDS Communications fell 2 3/8 to 29 1/4, in NASDAQ trading. The companies agreed to a merger through an exchange of stock.
* USF&G; rose 3/8 to 12 3/4, touching its highest levels since 1990. The insurance holding company, plagued by losses the past two years, said it expects to return to profitability this year, at least before meeting the requirements of dividends on its preferred stock.
* Salomon Inc. gained 3/4 to 33. The company named Robert Benham, its general counsel, to succeed Warren Buffett as chairman and chief executive.
In overseas trading, stocks closed high in Tokyo, but fell in Frankfurt and London.
Tokyo’s 225-share Nikkei average closed 63.13 points higher at 18,188.68. In Frankfurt, the 30-share DAX average fell 12.81 points to 1,788.58, and London’s Financial Times 100-share average finished 25 points lower at 2,680.9.
Credit
Treasury securities prices were mixed, with long-term bonds posting a slight decline after an afternoon rebound.
The price of the Treasury’s bellwether 30-year bond dropped 3/32 point, or 94 cents per $1,000 in face amount, after rising $2.50 on Tuesday. Its yield rose to 7.87% from 7.86%.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.75%, down from 3.813% late Tuesday.
Currency
The dollar settled mixed on world currency markets as trading focused on European currencies.
Dealers spent the session reacting to news that Denmark had rejected the Maastricht Treaty on closer European economic and political union. Some investors who felt uncertain about the weaker European currencies bought dollars, but the biggest beneficiary was the German mark.
“The reasoning is that the Germans have the least to lose in terms of European unity because they already are economically independent,” said Randolph Donney, research director at Pegasus Econometric Group in Hoboken, N.J.
The dollar was trading at 1.604 German marks in New York, down from Tuesday’s 1.614 marks. The dollar was at 127.45 Japanese, unchanged from late Tuesday.
The British pound slipped to $1.819 from Tuesday’s $1.816.
