Dow Drops 4.3 on Uncertainty About Mideast : Market Overview
* The stock market drifted through a mixed session, restrained by weakness in overseas markets and uncertainty over events in the Middle East. The Dow Jones average dropped 4.33 points to 3,285.71, extending its loss for the week to 45.93 points.
* Treasury bond prices fell as traders sold securities to capture profits after a weeklong rally. The bond market also was pressured by a surprising rise in orders to U.S. factories for durable goods.
* The dollar rose against major currencies on the durable goods report, the heightened tensions with Iraq and indications that the German discount rate might drop.
Stocks
Analysts were encouraged that Wall Street avoided the type of selloff that hit Japan, where Tokyo’s Nikkei 225-share average dropped 542.15 points, or 3.38%, to 15,497.79 to show a huge drop of 1,050.28 points for the week. London, Frankfurt and Mexico City markets also registered steep declines.
“Considering what was going on around it, the market acted pretty good,” said Bruce Bittles at J. C. Bradford & Co.
“I don’t think there’s any question that when you wake up and see Tokyo and London down big, it’s going to restrain the enthusiasm of U.S. investors,” said Philip Orlando, an equity portfolio manager at Unity Management.
In the broader market, advancing issues and declines ran about even in the daily tally on the New York Stock Exchange. Big Board volume came to 163.89 million shares against Thursday’s 180.08 million.
By Friday afternoon, analysts said U.S. traders were reluctant to make big commitments while they watched President Bush’s reaction to Iraq refusing to let United Nations inspectors into an agricultural ministry building in Baghdad in their search for information on Saddam Hussein’s nuclear arsenal.
* Royal Appliance Manufacturing led the active list, plunging 12 3/8 to 8 3/4. Late Thursday, the manufacturer of vacuum cleaners jolted investors with word of sharply lower earnings for the second quarter.
* McDonald’s, also among the volume leaders, rose 1 3/8 to 43 3/4.
* Marvel Entertainment climbed 1 5/8 to 33 3/8 and Fleer, traded in the NASDAQ market, gained 2 1/2 to 28. Marvel agreed to acquire Fleer for $28 a share.
* General Dynamics rose 3 3/4 to 79 3/8. On Thursday the company said Warren E. Buffett’s Berkshire Hathaway had acquired about 15% of its stock, thus becoming its largest shareholder.
* Compression Laboratories, the most active NASDAQ stock, fell 3 7/8 to 8. The company reported a $2.17-million loss for the second quarter, citing fewer shipments than anticipated of higher-margin products including video-conferencing standard software.
* Jan Bell Marketing, traded on the American Stock Exchange, rose 2 1/8 to 14 5/8. The company said it extended through early 1997 an agreement that makes it the primary vendor of jewelry, watches and fragrances at Wal-Mart’s Sam’s Wholesale Clubs outlets.
* Blue chips that contributed to the Dow Jones industrials’ loss included General Electric, down 2 1/8 at 74 3/4; Philip Morris, down 1/4 at 77 1/2, and American Express, down 3/4 at 23 1/8.
Meanwhile, on the London Stock Exchange, the Financial Times 100-share average closed 22.3 points weaker at 2,377.2.
In Frankfurt, the 30-share DAX average was dragged down by economic and interest rate worries in the wake of the rise in the German discount rate eight days earlier. The DAX fell 12.95 points to 1,610.42 on the day.
The Mexico City’s bolsa ended 61.18 points, or 3.86%, lower at 1,522.94 on heightened fears about weak earnings at some top firms, traders said.
Credit
The price of the Treasury’s main 30-year bond fell 7/16 point, or $4.38 per $1,000 in face amount. Its yield rose to 7.57% from 7.53% late Thursday.
The 2.3% increase in durable goods orders last month exceeded economists’ projections of a 1% gain and more than compensated for a 2.2% drop in May, which was the first decline in three months.
The durable goods report hurt the bond market because signs of an improving or strong economy tend to reduce the likelihood the government will lower interest rates, which increases bond prices.
Many traders sold bonds to take advantage of higher prices after four straight days of gains, analysts said.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3%, down from 3.313% late Thursday.
Currency
Currency traders spent the day reacting to the news, said Jack Stapleton, vice president and senior corporate dealer at Standard Chartered Bank.
The two most important items were the durable goods numbers and a statement by the German finance minister, Stapleton said.
Traders heard the minister say there could be a lessening in the discount rate, Stapleton said, even though that remark was omitted from the official statement. Either way, traders anticipate lower German interest rates, he said.
Lower foreign interest rates would make the dollar more attractive by comparison.
The standoff with Iraq also put upward pressure on the dollar.
Investors tend to seek the safety of the dollar during international crises.
In New York, the dollar rose to to 1.504 German marks and 128.10 Japanese yen, from Thursday’s 1.482 marks and 126.70 yen respectively.
Commodities
Cocoa futures prices rose sharply on the New York Coffee, Sugar & Cocoa Exchange on concerns about dry weather conditions in Africa and labor unrest.
On other markets, grains and soybeans were lower, precious metals advanced, lumber slumped, livestock and pork futures were mixed and energy futures rose.
Speculative buyers were the driving force in the cocoa market, said Judith Ganes, an analyst with Merrill Lynch in Chicago.
Cocoa futures for September delivery settled $38 higher at $1,023 per metric ton as dry weather continued in the Ivory Coast, the world’s largest producer.
Energy futures settled higher on the New York Mercantile Exchange, with September light, sweet crude oil settling 2 cents higher at $21.98 a barrel.
August gold settled 70 cents higher at $359.30 an ounce, and September silver settled 0.06 cent higher at $3.983 an ounce.
