Dow Rises 4.05 as the Battered Dollar Steadies : Market Overview
* The dollar hit an all-time low of 1.3945 German marks in global trading, but stabilized to close in New York at 1.402, virtually unchanged from Monday. However, many currency traders said they expect further declines ahead.
* Calm returned to Wall Street after four straight sessions of losses, as a steadier dollar soothed nerves. The Dow Jones industrial average added 4.05 points to close at 3,232.22, although the broader market was mixed.
* Bond yields continued to inch up, while oil prices sank.
Currency
Fresh off major declines on Friday and Monday, the dollar continued to drop overseas and in early New York trading Tuesday.
Overseas, worries that the French may vote against the European union treaty in a Sept. 20 election were intensified by negative new French public opinion polls. That caused new turmoil in foreign exchange markets.
In U.S. trading, a disappointing report on consumer confidence suggested a further weakening of the American economy. That pushed the dollar to a new low of 1.3945 German marks early on.
But rumors of active Federal Reserve intervention in the market helped buoy the dollar later, and it closed at 1.402 marks, even with Monday.
Analysts said dollar sellers were simply running out of steam, if temporarily. The dollar has plummeted from 1.44 marks just since last Thursday on pessimism over the U.S. economy.
“There are good odds of a dollar bounce from here, although not a trend reversal,” said Lehman Bros. analyst Anne Parker Mills.
As long as foreign interest rates remain substantially higher than U.S. rates--and the U.S. economy shows no strong signs of life--capital is likely to continue flowing overseas, experts said.
“The problem is that given the interest rate structure, the fundamentals are just not there for a dollar rally at this stage,” said Randolph Donney, research director at Pegasus Econometric Group.
Against the Japanese yen, the dollar settled at 124.55 in New York, down from 124.60 Monday. But the dollar rose against the Swiss franc, to 1.248 from 1.243.
Stocks
The Dow lost 21 points in early trading, which analysts attributed to further worries about the dollar and to fresh losses in European stock markets overnight.
But a level dollar helped stabilize stocks as trading progressed. The Dow’s gain of 4.05 points for the day followed a net loss of 101.31 points in the four prior sessions.
Still, losers led gainers 986 to 734 on the New York Stock Exchange. Volume rose to 202.8 million shares from 165.7 million Monday.
Some analysts said the market had suffered such an extreme bout of pessimism that it was now poised to rebound, at least temporarily. “The market is trying to right itself,” said Ed Laux, trader at Kidder, Peabody & Co.
A rise in IBM, which added 2 to 87 1/8, helped strengthen the Dow.
Several analysts said IBM’s gain may have reflected emerging assumptions that multinational firms will benefit from the dollar’s continued weakness, as U.S. exports get cheaper overseas.
“You’re going to get some very strong effects for companies that do a lot of business overseas,” said strategist Ron Hill of Brown Bros., Harriman & Co.
However, other analysts said stocks would have a tough time mounting a rally with interest rates creeping up and the presidential election still up for grabs.
In foreign markets, London stocks closed at a new 1992 low but above the day’s worst levels, influenced by opinion polls showing strong French opposition to the European unity treaty and by fears of an imminent rise in British interest rates. The Financial Times-100 index fell 30.1 points to 2,281.
In Frankfurt, gloom over high interest rates sent German stocks plunging 2% to an 18-month closing low. The DAX index fell 29.83 points to 1,468.91.
In Tokyo, stocks ended lower in seesaw trading on a healthy volume. The Nikkei average lost 247.19 points to 16,380.77.
In Mexico City, the Bolsa index slid 13.67 points to 1,353.09, extending its losses.
Among U.S. market highlights:
* Tech stocks drew some buyers, following IBM’s gain. Intel rose 1 1/8 to 56 1/4, Apple added 1 1/8 to 44 3/8, Microsoft jumped 1 3/8 to 70 3/8, Texas Instruments was up 7/8 to 38 and AST Research gained 1/2 to 11 3/4.
But Picturetel plunged 4 1/4 to 11 1/4 after saying it expects to break even in its third quarter on revenue that is flat or slightly lower in contrast to the second quarter. Hambrecht & Quist Inc. and Alex. Brown & Sons cut ratings on the firm, which makes video-conferencing equipment.
* Some drug stocks gained after analysts noted the companies are major exporters and thus could be helped by the weakened dollar. Merck rose 5/8 to 51, Pfizer added 1/2 to 80 1/2 and Bristol-Myers Squibb jumped 1 1/2 to 67 1/4.
* Ford soared 1 3/8 to 40 1/8. It said domestic car sales from Aug. 11 to 20 rose 13.7%. GM, however, fell 1/4 to 33 3/4 and Chrysler was flat at 19 1/2 on poor sales reports.
* Insurance stocks were mixed, despite the mounting losses from Hurricane Andrew. Chubb fell 1 to 73 7/8 and USF&G; lost 5/8 to 11 1/4, but AIG gained 1/2 to 93 7/8 and Travelers was up 1/8 to 20 3/4.
* Among losing issues, grocery giant Safeway fell 3/8 to 11 3/8, a new 1992 low. After the close, the firm forecast third-quarter earnings would drop 50% from a year ago.
Elsewhere, hospital firm HCA tumbled 1 3/4 to 19 7/8. A 180-day lockup agreement prohibited insider selling follows HCA’s initial public offering of 34 million shares at $21.50 each in February. That lockup expired Tuesday, and some insiders sold.
Credit
Treasury bond yields inched up again, as weak economic news failed to offset continuing worries about the dollar.
The price of the Treasury’s main 30-year bond fell 5/16 point, or $3.13 per $1,000. Its yield, which rises when prices fall, was 7.47%, up from 7.44% Monday.
Bonds failed to respond to the dismal consumer confidence figure, suggesting a weakening economy.
“The dollar rout . . . is really responsible for the weakness we’ve seen in the bond market and there is nothing compelling in the data to reverse that trend,” said Tony Vignola, economist at Kidder Peabody.
Many bond investors are fearful that the Federal Reserve will raise interest rates to stop the dollar’s decline, by making U.S. rates more competitive with European rates.
The federal funds rate, the interest on overnight loans between banks, held steady at 3.3125%.
Commodities
Oil prices retreated from sharp gains posted Monday as fears receded that Hurricane Andrew would wreak lasting damage on Gulf Coast oil rigs and refineries.
“We’re still at the mercy of the hurricane,” said Tom Blakeslee, analyst at Pegasus Econometric. But he said other factors--increased OPEC oil production and seasonal increases in North Sea output--pointed to lower prices.
“The hurricane probably won’t do lasting damage to oil refineries, so the market couldn’t sustain (Monday’s) short-covering effort,” said analyst Jim Steel of Refco.
October crude oil sank 39 cents to $21.15 a barrel on the New York Merc, giving back most of Monday’s 46-cent gain.
Cotton prices also receded after reaching the maximum gain Monday based on thinking that hurricane-driven rains would swamp Mississippi Delta crops.
Meanwhile, gold fell $1 an ounce to $340.60 on New York’s Comex as the slide of the U.S. dollar slowed. September silver was 1.5 cents lower at $3.70.
