Dow Slips 6.48 on Concern About Japan : Market Overview
* The Tokyo stock market’s Nikkei stock average fell 243.78 points, or 1.6%, to 14,822.56, its first close below 15,000 in six years. Traders said bearishness remained rampant, and there was no sign of a market bottom.
In afternoon trading today, the Nikkei was virtually unchanged.
* In New York, a round of computer-driven selling, set off by concerns about Japan’s market plus technical factors, sent stocks lower. The Dow Jones industrials, which gained 5.40 points Monday, slipped 6.48 points to 3,331.10.
* Treasury bond yields fell again, though in quiet trading, on further evidence of a sluggish recovery and after the Treasury’s sale of 3-year notes went as expected. The yield on the 30-year T-bond fell to 7.31% from 7.36% Monday.
* The dollar rose after European central banks stepped in to bolster it against the German mark.
Stocks
Stock traders faced a second day in which the market lacked clear direction.
Analysts shrugged off a government report that U.S. labor costs posted their smallest gain in 17 years during the first half of 1992.
Reports of Federal Reserve intervention to support the dollar overseas also failed to excite stock traders.
Against this backdrop, computerized selling drove the Dow average down 20 points within an hour of the opening bell.
In the broader market, declining issues outnumbered advances by about 6 to 5 on the New York Stock Exchange.
Big Board volume was moderate, with 173.94 million shares changing hands, up from 142.48 million Monday.
Alan Ackerman, executive vice president at Reich & Co., said stock traders are concerned about the poor outlook for the global economy, particularly in Japan and Britain. While the Tokyo market’s troubles have gotten most of the publicity, European stock markets also have plummeted in recent days.
Tuesday, London stocks suffered their lowest close since February, 1991. The Financial Times 100-share average lost 16.1 points to 2,309.6.
German shares also tumbled again, dropping 1.1% through a key support level to their weakest close since Dec. 27. Frankfurt’s 30-share DAX index plunged 17.95 points to 1,564.60.
Among U.S. market highlights:
* U.S. Surgical, which fell 6 7/8 to 73 1/2, was the most actively traded NYSE stock. A large Wall Street firm cut its rating of the popular medical technology company.
* Retail companies were mixed despite industry leaders’ stronger second-quarter earnings. Wal-Mart, up 1/4 to 57 1/2, said profit came in at 37 cents a share, versus 30 cents during the same period in 1991.
J.C. Penney, down 2 1/8 to 70 1/4, reported earnings of 61 cents a share, compared to 19 cents during the year-earlier period.
* Among other retailers, Gap tumbled 3 3/8 to 32 3/8 in heavy trading. After the closing bell, another investment banking firm downgraded the clothing chain’s prospects.
* Commonwealth Edison fell 1 1/2 to 24 1/8 in active trading after Illinois utility regulators recommended a $395.7-million annual rate cut.
* McDonnell Douglas gained 3 1/4 to 40 3/4 a day after announcing a restructuring that would spin off or sell its helicopter unit and close an Ohio plant. Analysts believe that the cost-cutting measures will improve earnings.
* Southland home builder Presley Cos. plummeted 2 1/8 to 5, one day after reporting a second-quarter loss caused by a write-down of the firm’s real estate assets.
Credit
The 30-year bond’s price rose 19/32 point, or nearly $5.94 per $1,000 face amount.
“It was a seesawing day,” said Steven A. Wood, an economist with BankAmerica Capital Markets group. “Volume was very light.”
Wood said Treasuries rose early in the day as traders concerned about Tokyo’s stock market plunge sought the safety of government bonds.
Bonds then turned mixed on concerns surrounding the quarterly refunding auction of $15 billion in three-year notes, Wood said.
Good results in the auction helped bring prices back, traders said.
Bonds rallied again on a retail sales survey that showed weak spending in the first week of August, Wood said.
The Johnson Redbook weekly survey showed that the seasonally adjusted sales pace in the first week of August, if continued throughout the month, would produce a decline in sales from July.
Sluggish economic activity lessens the possibility of inflation, which would erode the value of fixed-income securities such as bonds.
The federal funds rate, the interest on overnight loans between banks, fell to 3.125% from 3.313% Monday.
Currency
The German Bundesbank said it took part in a concerted intervention to boost the value of the dollar.
Foreign exchange dealers said the German central bank began buying dollars when the U.S. currency reached about 1.4620 marks. It was the second time in less than a week that central banks entered the markets to support the sagging dollar.
In New York, the dollar rose to 1.467 marks from 1.463 Monday.
Judy Rubenstein, a vice president at Bank of America in San Francisco, said the dollar fell before the intervention out of concern about the Treasury’s refunding auction.
Ziggy Zborowski, a trader at Bank Leumi in New York, predicted further intervention to bring the dollar up against the mark because profit taking keeps driving the U.S. currency down again.
The dollar rose to 128.00 Japanese yen from Monday’s 127.90. The British pound was $1.929, down from $1.932.
Commodities
Cotton futures prices tumbled on the New York Cotton Exchange amid speculation that the government will raise its 1992 harvest estimate and lower its exports projection in a report to be released today.
On other commodity markets, grain and soybean futures rallied; cocoa futures sank; precious metals retreated; livestock and meat futures fell, and oil futures were lower.
Cotton for October delivery plunged 1.91 cents to 59.95 cents a pound. The December contract dropped the permitted daily limit of 2 cents to 57.87 cents a pound.
On New York’s Commodity Exchange, gold for August delivery fell $3.10 to $347.30 an ounce, and September silver fell 7 cents to $3.895 an ounce. October platinum dropped $2.60 on the New York Mercantile Exchange to $367.70 an ounce.
Prices of most energy futures continued to slip, led by fears that heating oil stocks are piling up faster than demand. Light, sweet crude oil for delivery in September settled at $20.91 per barrel, down 12 cents, on the New York Mercantile Exchange.
