Dow Up 4.86 on 11th-Hour Buying Surge : Market Overview
* U.S. stocks closed out the third quarter with slight gains, while many foreign markets fell further.
* The dollar steadied after plummeting against most major currencies on Tuesday. But it touched a new all-time low against the yen.
* Coffee prices surged on signs of a thaw between coffee producing and consuming nations.
Stocks
With buyers still wary ahead of the release of Friday’s unemployment figures for September, the Dow Jones industrial average edged up 4.86 points to 3,271.66.
Brokers said some afternoon buying stemmed from last-minute maneuvering by big money managers who want to show certain stocks in their portfolios when they report third-quarter performance results to clients.
Advancing issues led decliners 1,030 to 687 on the New York Stock Exchange, where volume was a moderate 184 million shares, compared to 170 million Tuesday.
Analysts said many investors remain sidelined, waiting to see if a bad unemployment number provokes the Federal Reserve to cut interest rates once more in a bid to help the economy. Rumors circulated Wednesday that the Fed could cut its key discount rate as much as 1 point, from 3% to 2%, if the unemployment report is as bad as expected.
In another gloomy economic report, the government reported Wednesday that new home sales in August fell 6.1% nationally from a year earlier. In California, they plunged a whopping 19.5%.
Among the market highlights:
* IBM lost 1/4 to 80 3/4 after trading at 80, a 10-year low. The company late Tuesday announced new plant closings and double the expected number of staff cuts. Investors took the news to mean that IBM’s goal of getting back on a growth track remains out of reach for the time being. Brokerage Oppenheimer downgraded the stock from buy to market performer.
Another tech stock, software maker Computervision, plummeted 3 to 6 1/4. The company forecast substantially lower third-quarter earnings, citing the weak economy.
* Sears was unchanged at 44 3/4 after jumping 3 3/8 Tuesday, when it announced plans to dispose of its financial services businesses and focus on its core retailing business.
* Insurance stocks were the day’s big winners. They continue to surge on expectations that recent natural disasters will allow insurance rates to rise across the board. Chubb gained 2 1/2 to 85 1/2, AIG jumped 2 7/8 to 106, General Re added 1 7/8 to 103 7/8, and CNA Financial rose 2 to 93 1/4.
Meanwhile, L.A.-based life insurer Broad Inc. jumped 1 3/8 to 22 5/8 after Merrill Lynch upgraded the stock to buy.
* Natural gas stocks continued to gain, riding the crest of a summer-long rally in gas prices. Piedmont Natural Gas rose 1 7/8 to 38 3/4, Enron added 3/4 to 49, Arkla gained 3/8 to 10 3/4, and Peoples Energy rose 1/2 to 31 1/4. Among oil issues, Arco jumped 1 1/4 to 121 1/4 after Oppenheimer raised its third-quarter earnings estimate to $1.91 a share from $1.80.
* Many smaller stocks showed new strength. They have led the market rebound in recent weeks. Among Southland issues, hair-care firm DEP rose 1 1/4 to 13 1/4 after reporting higher quarterly earnings. Another big regional gainer among smaller stocks was IDB Communications, up 2 3/8 to 17 1/4.
Overseas, German shares skidded to just above 1992 lows on high interest rates, the weak dollar and economic worries. Frankfurt’s DAX index lost 9.9 points to 1,466.36.
London stocks dipped on program selling and news that corporate bankruptcies have jumped. The 100-share Financial Times index dropped 12.5 points to 2,553.0.
Tokyo stocks fell for the fourth straight day. The Nikkei average lost 349.01 points to 17,399.08.
Currency
The dollar steadied, but traders said the buck is poised to set new lows against the German mark and Japanese yen if a sizable drop in September U.S. employment triggers another cut in U.S. interest rates on Friday.
The dollar closed in New York at 119.85 Japanese yen, up from 119.25 Tuesday, after dipping overnight in Tokyo to a new all-time low of 118.60 against the yen before recovering.
The dollar was flat in New York versus the mark, at 1.410 compared to 1.411 Tuesday.
Meanwhile, in a sign that currency turmoil in Europe continues to subside, Sweden lowered its key lending rate to 24% from 40%.
But in Canada, banks lifted their prime lending rate a full two percentage points to 8.25% after the Canadian dollar took a beating on fears that a vote on national unity will be defeated.
The Canadian dollar recovered after the rate increases to close at 80.32 U.S. cents, compared to 80 cents Tuesday.
Credit
Bond yields were mostly lower, except on long-term issues.
The price of the 30-year bond fell 3/16 point, or $1.87 per $1,000. Its yield inched up to 7.38% from 7.36% Tuesday.
Traders appear to be squaring positions ahead of the Friday unemployment report, with most evidently betting the Federal Reserve will ease credit again. Rumors to that effect were strong in credit markets Wednesday, and short-term T-bill rates declined sharply for a second straight day.
The fed funds rate, the rate on overnight loans between banks, rose to 5.00% from 2.75% Tuesday. The rate often fluctuates on Wednesdays for technical reasons.
Commodities
Coffee prices surged, after eight days of talks in London succeeded in breaking an icy relationship between coffee consuming and producing nations.
December coffee jumped 1.60 cents to 55.70 cents a pound on New York’s Coffee, Sugar and Cocoa Exchange.
Growers and consumers now at least agree on a definition of quotas and made headway on the principle of selectivity, which would allow consumers to choose the type of coffee they import.
Elsewhere, October gold slipped 40 cents to $347.80 an ounce on New York’s Comex. December silver rose 1.4 cents to $3.76.
Light, sweet crude oil for November rose 4 cents to $21.71.
