Dow Up 45 as Buyers Jump on Bandwagon : Market Overview
Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:
* Buyers leaped aboard the surging stock market for the second day in the heaviest trading in more than six months, amid a climate of lower interest rates and surprisingly strong earnings.
* The Dow Jones average, up nearly 52 points Tuesday, climbed another 45.12 points to 3,379.19.
* After soaring first on concern about economic weakness then falling on profit taking, Treasury bond prices ended slightly lower. The price of the Treasury’s bellwether 30-year bond fell 4/32 of a point, or $1.25 per $1,000 in face amount. Its yield, which rises when prices fall, was 7.44%, up from 7.43% on Tuesday.
* The dollar rose against most currencies, apparently on the coattails of rallies in the stock and bond markets.
Stocks
The market upturn was fueled initially by a steep fall in bond yields Wednesday morning, which fanned demand for stocks.
The Dow Jones industrials’ rise carried the average to its highest close since June 8, when it stood at 3,404.13. A week earlier it had set its record closing high of 3,413.21.
Advancing issues outnumbered declines by more than 5 to 2 on the New York Stock Exchange, while Big Board volume came to an estimated 275.78 million shares, up from 218.06 million in the previous session and the heaviest total since a 284.56 million-share day Jan. 17.
The broader Standard & Poor’s 500 index surged 4.71 points to hit a record 422.23, shattering the previous record of 420.77 set Jan. 15.
Even though bonds have been benefiting from signs of economic weakness, analysts say their rise helps the stock market in a couple of important ways.
For one thing, it decreases the relative appeal of interest-bearing investments as they compete with stocks for new investable funds.
Also, Wall Streeters consider it a highly favorable portent for long-term economic growth prospects in a setting of low inflation and interest rates.
Several component stocks of the Dow Jones industrial average contributed to Wednesday’s advance with positive earnings developments.
* Eastman Kodak, one of the most active NYSE issues, rose 1 1/8 to 43 7/8. Late Tuesday the company reported second-quarter earnings that were up slightly from the like period last year and above analysts’ expectations.
* DuPont jumped 2 3/4 to 52 3/8. The company also posted improved second-quarter operating profit before a non-recurring charge.
* Bethlehem Steel, which said it saw a chance for better results in late 1992 and 1993, rose 1 to 14 3/8.
* Other gainers among the blue chips included Bristol-Myers Squibb, up 1 3/4 at 69; General Motors, up 1/4 at 41 5/8; Philip Morris, up 1/2 at 79, and Merck, up 1/2 at 51 1/2.
* Elsewhere, Maxus Energy added 1/8 to 6 3/4 in active trading. The company posted a narrowed loss for the second quarter.
Retailing stocks chalked up some notable gains, underscoring traders’ willingness to shrug off Tuesday’s report of slumping consumer confidence.
* Wal-Mart Stores rose 3/4 to 55 7/8; Kmart 1 1/2 to 24 1/2; Sears, Roebuck 1 3/8 to 40 7/8; Gap Inc. 1 1/2 to 35 3/4; The Limited 1/8 to 21 1/8, and J.C. Penney 1 to 72 1/8.
* One exception to the broad up trend were the American depositary shares of Japanese companies, which declined broadly as the Tokyo market sank to a new six-year low. Kubota fell 6 1/4 to 70; Matsushita Electrical 2 1/8 to 93 1/8; Hitachi 7/8 to 57 3/8, and Kyocera 5/8 to 54 1/4.
Overseas, stocks hit six-year lows in Tokyo as the 225-share Nikkei average closed down 330.69 points at 15,095.95 after flirting with 15,000.
In London, shares were boosted by Wall Street’s 52-point rise Tuesday. The Financial Times 100-share average ended up 49.8 points at 2,423.2.
In Frankfurt, German shares made their largest one-day gain in nine weeks with the 30-share DAX average rising 17.51 points to close at 1,628.15.
Credit
The strength of Tuesday’s bond market rally spilled into early Wednesday trading.
But late in the day, a variety of factors including lax demand at the Treasury Department’s auction of five-year notes prompted profit taking, said Kevin Flanagan, an analyst with Dean Witter Reynolds Inc. in New York.
The auction “was probably used as a catalyst to ring the cash register,” Flanagan said.
The Treasury sold $10.5 billion in notes, yielding an average 5.56%. That was in line with expectations, but marked the lowest level since the start of regular five-year auctions in 1977.
In the secondary market for Treasury bonds, short-term maturities were unchanged to down 4/32 point, intermediate maturities were down 3/32 to 4/32 and long-term issues were unchanged to down 4/32 point, the Telerate Inc. financial information service reported.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
The federal funds rate, the interest on overnight loans between banks, fell to 2.875%, down from 3.188% late Tuesday.
Commodities
Concern over abundant supplies sent sugar futures plunging on New York’s Coffee, Sugar & Cocoa Exchange.
On other markets, precious metals were lower, grain and soybeans were mixed; livestock and meat futures were mostly higher, coffee fell and energy futures were mixed.
October sugar settled 0.67 cent lower at 9.39 cents a pound, its lowest level in two weeks.
The selloff was triggered by fear of a new glut of Indian sugar that could hit the market in the next several days.
Elsewhere, gold and silver futures fell on New York’s Commodity Exchange and platinum drifted lower on the New York Mercantile Exchange.
Peter Cardillo, an analyst with Westfalia Investments Inc., said there is an overall weakness in the metals market because the equity markets are strong on the upside.
August gold settled $2.40 lower at $356.50 an ounce and September silver was 5.5 cents lower at $3.903 an once; October platinum was 90 cents lower at $374 an ounce.
Energy futures were mixed on the New York Mercantile Exchange, with September light, sweet crude oil declining 5 cents to $22 a barrel.
Currency
The dollar closed in New York at 127.80 Japanese yen, up from Tuesday’s late quote of 127.45, and hit 1.483 German marks, up from 1.473 Tuesday.
The dollar “seems to have pretty much moved in concert with the bond and equity markets,” said Tom Hoge, a corporate trader at the New York branch of Credit Suisse.
