Dow Increases 36.47 on Strong Earnings News : Market Overview
Wall Street stocks posted solid gains as upbeat corporate earnings captured the market’s attention despite investors’ caution ahead of the Nov. 3 presidential election. The Dow Jones industrial average rose 36.37 points to end at 3,244.11.
* Treasury bond yields rose as the market grew concerned about upcoming auctions of Treasury securities and uncertainty in the presidential race. At the close, the long bond’s yield was 7.67%, up from 7.63% late Friday. Its price, which falls when yields rise, was down 13/32 point, or $4.06 per $1,000 in face amount.
Stocks
The market was also bolstered by gains in some leadership stocks such as Philip Morris Cos., Merck & Co. and Procter & Gamble Co.
“Maybe there’s a bit of relief that this earnings period wasn’t a horror show,” one trader said.
“There were a couple of decent earnings reports,” said Ron Doran, director of institutional trading at C.L. King.
In the broader market, advancing issues outnumbered declines by about 3 to 2 on the New York Stock Exchange, while Big Board volume eased to 188.12 million shares from Friday’s 199.07 million.
Meanwhile, the Dow transportation index, continuing a spate of recent gains, shot up 23.17 points to 1,356.34. The index is considered a barometer of the economy, and analysts said its performance has been a prop for the overall market.
“The transports have been acting very well,” Doran said.
However, uncertainty about the election continued to dog the market.
“There seems to be a little bit of feeling this may turn out to be horse race,” Doran said. Over the last few weeks, investors have been betting on a victory by Arkansas Gov. Bill Clinton, who still holds a significant lead over President Bush.
“Today is more of a Dow market,” said Marshall Acuff, a portfolio strategist at Smith Barney. “You’ve got buyers under the market, and when they see it doesn’t fade, they are in there.”
He said recent polls that showed a narrowing in the gap between Clinton and Bush “may be encouraging more interest.”
John Blair at County Natwest said some buying by program traders contributed to the gains.
“I think anybody that wanted to make a big bet on the election probably has made it, and people are a little bit anxious about what (Texas billionaire Ross) Perot means,” he said, referring to the third party candidate who has been scoring with his emphasis on the economy and government.
Among the market highlights:
* In the transportation sector, which is known as highly sensitive to the ups and downs of the economy, point-plus gainers included Federal Express, up 2 1/8 to 45; CSX, up 1 1/4 to 63 7/8; Norfolk Southern, up 1 7/8 to 62 1/8, and Consolidated Rail, up 1 1/2 to 43.
* At the same time, some big-name food, tobacco and pharmaceutical issues--generally considered growth stocks resistant to the economy’s swings--also did well. Merck added 1 7/8 to 43; Philip Morris 1 1/8 to 75 5/8; Eli Lilly 3/4 to 59 5/8, and Coca-Cola 3/4 to 40 3/4.
* An exception was International Business Machines, which sagged 1 5/8 to 67 1/2 and hit a new 10-year low.
* Procter & Gamble was among the bigger blue chips reporting unexpectedly strong results, with the shares gaining 2 1/2 to 53 1/2.
* General Motors added 5/8 to 34 1/8. Its chairman, Robert Stempel, resigned.
* British Steel slipped 1 5/8 to 8 3/4. It said it plans to cut production in line with a further fall in demand.
* U.S. Healthcare slumped 6 3/8 to 43 3/8. While its third-quarter profit was within expectations, analysts said results showed higher expenses and lower margins.
* Other health care companies that lost ground included Foundation Health, down 2 5/8 to 39 1/4, United Health, off 2 3/4 to 50 7/8, and Pacificare, off 2 to 42 1/4.
In overseas trading, share prices edged higher in Frankfurt as hopes for a near-term cut in interest rates led investors to buy cautiously. The 30-share DAX average gained 15.67 points to 1,542.49.
Stocks ended lower in Tokyo after barely moving during the day. The Nikkei 225-share average ended down 106.32 points to 17,011.33.
Share prices fell on the London stock exchange, with the Financial Times 100-share average losing 8.1 points to close at 2,661.6.
Credit
The Treasury is scheduled to sell $15 billion worth of two-year notes today and $10.75 billion worth of five-year notes Wednesday. In addition, the agency plans to announce Friday the amount of securities it will sell in its quarterly auction to refund the nation’s debt.
Pending auctions of new securities often depress the price of existing government bonds, since the market worries whether the new supply can be absorbed without hurting prices.
“There are a lot of supply issues,” said Steven R. Ricchiuto, chief economist at Barclays de Zoete Wedd Securities Inc.
In addition, he said, the comments over the weekend by Ross Perot about alleged Republican smear tactics against him have heightened concern in the bond market about the presidential race. The market typically is flustered by political uncertainty.
Prices recovered somewhat later in the day on buying that was attributed to short covering, or investors buying bonds to cover investment positions in which they bet the value of the securities would decline.
In the secondary market for Treasury securities, short-term maturities fell 2/32 point to 5/32 point and intermediate maturities fell 6/32 point to 8/32 point, the Telerate Inc. financial information service reported.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
The federal funds rate, the interest on overnight loans between banks, rose to 3.188% from 2.875% late Friday.
Currency
The dollar edged higher against most major currencies, led by a gain of nearly 4 cents against the British pound.
Dollar dealers said the currency remained within a fairly narrow range in domestic trading and that activity was relatively subdued.
Its biggest move was against the British pound. The pound fell to $1.585 in New York from $1.623 late Friday.
Dealers in London cited fears that there could be another national election if Prime Minister John Major fails to persuade Parliament to ratify a European union treaty. Major’s office has refused to confirm or deny British news reports that he will quit and call a vote if he loses a vote Nov. 4 at the start of a new debate on the treaty.
In New York, the dollar closed 1.531 German marks and 121.85 Japanese yen, up from 1.528 marks and 121.60 yen respectively late Friday.
Commodities
Copper futures rallied on New York’s Commodity Exchange, making a comeback from Friday’s selloff on news of Asian buying overnight.
On other markets, grains and soybeans were lower, precious metals fell, livestock and pork were mostly higher, and energy declined.
Copper for delivery in November settled 1 cent higher at 99.55 cents a pound.
Elsewhere, precious metal futures fell in light trading on the Comex, with gold pressured by the strength of the dollar and reports of selling by producers.
October gold settled $2.50 lower at $341.10 an ounce; December silver was 2.5 cents lower at $3.757 an ounce.
Crude oil futures came off the day’s lows because of a lack of sellers, analysts say. December light, sweet crude oil was 8 cents higher at $21.27 cents a barrel.
Market Roundup, D14
