Dow Up 4.59 on Day of Uncertainty : Market Overview
Highlights of Tuesday’s market activity, compiled from Times staff and wire reports:
* Uncertainty over President Bush’s plans for the economy kept Wall Street on hold, allowing blue chips to tack on small gains but causing some broader market indicators to sag. The Dow Jones average of 30 industrials rose 4.59 points to 3,329.48.
* Treasury bond prices rebounded amid continued weakness in the housing sector. The price of the Treasury’s main 30-year bond gained 13/32 point, or $4.06 per $1,000 in face amount, while its yield fell to 7.33% from 7.36% late Monday.
Stocks
The rebound in Treasury bonds following weaker-than-expected housing data helped stock prices, but buyers nonetheless remained scarce ahead of news from the Republican National Convention underway in Houston.
In the broader market, advancing issues outnumbered declines 7 to 6 on moderate New York Stock Exchange volume of 171.75 million shares, up from Monday’s 152.83 million.
The Commerce Department said housing starts fell 2.8% in July. Construction of new single-family homes and apartments totaled 1.12 million units at a seasonally adjusted annual rate, down from 1.15 million in June and lower than the 1.2 million that private economists had forecast.
The markets are eagerly awaiting comments on economic policy in Bush’s address to the GOP convention Thursday night.
“I think we’ve got a market that’s marking time waiting to see what the outcome of the Republican convention is going to be, particularly what Bush will say on Thursday night,” said Marshall Acuff, a portfolio strategist at Smith Barney.
Richard Hoffman, an investment strategist at Cowen & Co., said: “The market expects Bush will make this (the presidential contest) a real race.”
Analysts also said they were encouraged that Wall Street shrugged off a 4.15% tumble in Tokyo shares.
Tokyo’s 225-issue Nikkei average dropped 620.14 points to 14,309.41--its lowest close since March 12, 1986, when it registered 14,238.13.
After the Nikkei’s latest plunge, Finance Minister Tsutomu Hata announced new measures aimed at stabilizing Japan’s financial markets.
“Early on, people thought that would be very negative for our market,” said Alice Sadlo, a first vice president at McDonald & Co.
Elsewhere overseas, stocks tumbled in London in light volume, deflating recent optimism that the market was poised for a recovery from its summer slide. The Financial Times 100-share average fell 21.4 points to 2,354.7. In Frankfurt, shares more than wiped out two hesitant days of gains. The 30-share DAX index dropped 22.20 points to 1,533.22.
Among the market highlights:
* Hewlett-Packard tumbled 3 3/8 to 57 1/4 after it posted flat third-quarter profits.
“But on the other hand, Toys R Us had good numbers,” Acuff noted. “That continues to be the story of the market--what happens to individual stocks.”
* Toys R Us, which reported earnings Monday, closed up 1 1/2 at 38 1/2. Oppenheimer upgraded its rating on the company, and several analysts repeated buys.
* Compaq Computer dropped 1 7/8 to 27 7/8. It said in a regulatory filing that third-quarter results will be hurt by parts shortages for some of its products.
* Dell Computer added 2 1/8 to 25 3/8 after posting second-quarter profit and saying that analysts’ third-quarter estimates were conservative.
* System Software jumped 2 5/8 to 26 5/8. It said third-quarter profit rose to 32 cents a share from 22 cents a year ago.
* Kroger slipped 1 7/8 to 11 5/8 after the company said its third-quarter earnings are expected to be close to break-even.
* Northeast Bancorp sank 3 1/8 to 7 after it adjusted its second-quarter results sharply lower to reflect the charge-off of an additional $44 million in loans.
* Home Depot added 3/8 to 52 1/4. Alex. Brown repeated a strong buy on it based on its 29% second-quarter profit growth.
Credit
Bond prices improved immediately after the Commerce Department released its housing starts report.
The figures were lower than Wall Street analysts had predicted, which strengthened the bond market. Weak economic data bolsters the bond market on the belief that it will herald lower interest rates to stimulate the economy. Lower rates boost bond prices.
Short-term Treasury bills were bolstered by a meeting of the Federal Reserve’s policy-setting Open Market Committee. While no action was reported, analysts believe that any change in monetary policy would lead to lower interest rates.
The market had dropped Monday on fears about a possible economic plan by President Bush that would lower taxes, raising the deficit and forcing the government to issue more securities to finance debt payments.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3%, down from 3.5% late Monday.
Currency
The dollar drifted lower against most major currencies in thin trading as investors digested the housing report on the U.S. economy and tensions in the Middle East.
Dollar traders were somewhat discouraged by the housing report, said Richard Mahoney, vice president of foreign exchange at Citibank.
“Housing starts were weaker than the market expected, which keeps interest rate expectations low and naturally the dollar suffers a little bit,” Mahoney said.
Tensions between the United States and Iraq also caught traders’ attention, boosting the German mark against most other currencies, Mahoney said.
In New York, the dollar fell to 1.457 marks from 1.464 late Monday. In New York, the British pound rose to $1.9305 from $1.9250 Monday. The dollar closed at 126.15 Japanese yen, up from 125.70 yen late Monday.
Commodities
Cocoa futures surged on the New York Coffee, Sugar & Cocoa Exchange on concerns that a drought in West Africa will have an adverse affect on production.
Cocoa futures for December delivery gained $54 to settle at $1,103 per metric ton on reports of the drought’s adverse affect on cocoa production in the Ivory Coast, the world’s largest cocoa producer.
On other markets, meanwhile, grains and soybeans were lower, livestock and meat gained, precious metals weakened, and energy futures were mostly lower.
August gold was $1.10 lower on New York’s Commodity Exchange, closing at $335.80 an ounce; September silver was 1 cent lower at $3.777 an ounce, and October platinum was $3.80 lower at $343.30 an ounce.
September light, sweet crude oil finished 2 cents higher at $21.47 a barrel on the New York Mercantile Exchange.
