Dow Rises 13.78 as Rates Climb, Dollar Declines : Market Overview
Highlights of Thursday’s market activity
* Blue chip stocks posted moderate gains after a seesaw session Thursday, while shares in the broader market fell as investors hedged their bets ahead of the presidential election.
* Interest rates edged higher on stronger than expected economic statistics.
Stocks
Stocks ended higher on a late recovery in the bond market on news that jobless benefit claims for the latest week dropped to 368,000 from 383,000.
The Dow Jones average rose 13.78 points to 3,200.88.
But declining issues outnumbered advances by about 5 to 4 on New York Stock Exchange volume of 216.40 million shares, down slightly from Wednesday’s 219.10 million.
Analysts noted that the Dow index’s close above the key resistance level of 3,200 was significant. “That would be a sign indicating 3,230 and 3,240 on the next push,” on analyst said.
Hersh Cohen, president of Shearson Asset Management, said the market remained very selective. He noted that while auto stocks were higher, some drug shares were still attracting sellers.
“It’s both brutal and rewarding at the same time,” he said.
Gene Jay Seagle, director of technical research at Gruntal & Co., said while there is an expectation that Democratic candidate Bill Clinton will be elected President, “there’s a lot of money standing on the sidelines waiting to see how the market acts.”
Analysts said one positive development for stocks was strength in the transportation sector, commonly viewed as an indicator of the economy.
The Dow transportation index ended up 7.45 points higher at 1,313.43.
Among the market highlights:
* BankAmerica lost 2 1/4 to 41 3/4, topping the most-active list after Wall Street shrugged off efforts by company officials to calm fears over what some analysts considered a deterioration in its balance sheet in the third quarter.
* Trading of Pacific Telesis stock soared to about 3.4 million shares--nine times the average daily volume--as rumors swept Wall Street that the company’s directors will vote this weekend against a proposal to spin off its Pacific Bell telephone operations into a separate company.
Pac Tel dropped 1 7/8 to 40 1/8. The company called the rumor unfounded and noted that Chairman Sam Ginn has said a decision on the proposed split might not be made until the end of the year.
* Adaptec tumbled 7 3/8 to 23 1/8. Pacific Growth Equities downgraded its rating on worries that the company’s operating margins are likely to drop. Adaptec said its third-quarter earnings would likely be flat compared to the second quarter.
* Salomon Inc. slumped 4 1/4 to 33 3/4 after the Wall Street brokerage released disappointing third-quarter results.
* On the plus side, General Motors rose 1 7/8 to 32 7/8, Chrysler gained 3/8 to 26 3/4, and Ford rose 1/2 to 39 1/4.
* Weak drug stocks included Syntex, off 7/8 to 24 1/8, and Merck & Co., down 1/4 to 41 3/4.
Overseas, Frankfurt shares staged a technical recovery, with the 30-share DAX average ending 6.2 points higher at 1,510.11.
London’s Financial Times 100-share average closed 12.4 points higher at 2,658.1.
Stocks ended weaker in Tokyo, with the 225-share Nikkei average dropping 128.48 points, or 0.75%, to 17,013.04.
Credit
The turbulent bond market session was also influenced by some highly questionable trades in the Chicago futures market.
“It’s been a volatile day, what with the data and the ruckus in Chicago,” said Steve Ricchiuto, chief economist at Barclays de Zoete Wedd Government Securities.
The yields on the Treasury’s key 30-year bond ended at 7.61%, up from 7.60% Wednesday, while its price fell $2.19 per $1,000 in face amount.
Yields rose early in the day after the Labor Department reported that the number of Americans filing new claims for jobless benefits fell to 368,000 in early October, the lowest level in more than two years.
The 15,000 decline during the week ended Oct. 10 was the third straight drop, and some experts believe that the unemployment rate should decline if claims remain below 400,000.
The report surprised the credit markets, which expected a 15,000 increase in applications for unemployment insurance. Higher unemployment increases the chances that the Federal Reserve will lower interest rates to stimulate the economy, a move that increases bond prices.
The market was also whipsawed by what traders called possibly improper transactions in the Chicago futures pits and an unusual intervention in the market by the Chicago Board of Trade to correct them.
Traders and analysts said someone who may not have had proper trading credentials made a series of very large trades in Treasury bond futures that sent the market sharply lower. The transactions, rumored to be as many as 60,000 contracts, caused bond prices to plunge about a point.
Traders said the Board of Trade intervened, escorting an unidentified person off the floor and unwinding all of his trades. The Board of Trade’s action helped bond prices retrace their losses in the early afternoon.
The Board of Trade said its investigators were “on top of the situation from the very beginning.” The Board notified the U.S. attorney’s office and the Commodity Futures Trading Commission, which regulates futures trading, about possible violations of market rules and federal law.
The federal funds rate, the interest on overnight loans between banks, rose to 3.0%, up from 2.938% late Wednesday.
Currency
The dollar fell against most major currencies after receiving a short-lived boost on news of a drop in the number of new claims for jobless benefits.
The dollar moved in a very narrow range with little news to push it significantly in either direction, said Curtis Perkins, a currency trader at Chemical Bank in New York.
The greenback rose after the release of the weekly jobless report, but later went down.
In New York, the dollar settled at 120.73 Japanese yen, down from 122.60 late Wednesday. The dollar dropped to 1.508 German marks, from the previous day’s 1.607 marks.
At the close, the pound fetched $1.626, up from $1.607 late Wednesday.
Commodities
Frozen concentrated orange juice futures prices tumbled on reports producers are having trouble finding buyers for fresh Florida oranges.
Frozen concentrated orange juice for delivery in November settled 4.30 cents lower at 97.80 cents per pound.
Meanwhile, energy futures continued to slide on the New York Mercantile Exchange with December light, sweet crude oil declining 26 cents to $21.35 a barrel.
On New York’s Commodity Exchange, December gold was $1.00 lower at $343.10 an ounce, and December silver dipped 1 cent to $3.80 an ounce.
Dow Jones Industrials
Oct. 22, 1992 High: 3,221.14 Close: 3,200.88 Low: 3,162.79
Dow Jones Industrials
Oct. 22, 1992 216.40 million shares
