Investors Keep Their Cool After Clinton’s Win : Markets: The Dow slides 29 points, but there’s no dramatic reaction to Democrat’s election. The feeling is he’ll be good for stocks in the long run.
Financial markets reacted almost according to script on Wednesday to Bill Clinton’s capture of the White House: Many infrastructure and capital spending stocks gained, drug stocks sank, the dollar rose, and bond yields inched up.
Elsewhere, foreign stocks were generally on edge and oil prices tumbled in part on worries that Iraq’s President Saddam Hussein will see an opportunity under Clinton to get Iraqi oil back on the market.
On Wall Street, the Dow Jones industrial average lost 29.44 points to 3,223.04 in a late selloff, although analysts said most investors showed no dramatic reaction to Clinton’s win. “I think a Clinton victory was already in the market,” said Robert Kahan, a trader at Montgomery Securities in San Francisco.
Some major brokerages reiterated the increasingly popular view that Clinton should be good for stocks in the long run because he was elected to get the economy moving again.
In New York, PaineWebber’s investment strategist, Edward Kerschner, told clients that Clinton is “fundamentally bullish, not bearish,” and he predicted that the Dow will reach 3,600 to 3,750 in 1993 as the economy grows.
Elaine Garzarelli, strategist at Shearson Lehman Bros., advised clients to continue buying stocks of computer, instrumentation, machinery, steel and pollution control companies. She forecast strong earnings growth for those industries in 1993, in part because of expected higher spending on the nation’s infrastructure and on plant modernization--two of Clinton’s major economic themes.
Meanwhile, Clinton himself attempted to calm investors’ fears of sharply higher federal spending and inflation, which Wall Street has long considered to be the hallmarks of any Democratic Administration.
“We understand the need to pursue stability even as we pursue new growth,” the President-elect told reporters in Little Rock, Ark. “The changes we seek will strengthen American markets, not weaken them.”
Bond investors remained suspicious. The yield on 30-year Treasury bonds closed at 7.67%, up from 7.66% Tuesday. The yield on that bond, considered a benchmark for long-term interest rates in general--such as on mortgages--has been rising since late September on the assumption of a Clinton win.
But some big bond investors said the market’s concerns appear to be abating. “Clinton sounds fine,” said Jack Lemein, a bond portfolio manager at the Franklin Group of mutual funds in San Mateo. “He doesn’t sound like he wants to become another (Jimmy) Carter.”
In some foreign markets, however, investors appeared concerned that Clinton would adopt a protectionist tone on trade. In Mexico City, the Bolsa index lost 10.65 points to 1,547.75 on worries over Clinton’s generally cautious attitude toward the proposed North American Free Trade Agreement.
Likewise, the Toronto stock exchange’s 300-share index eased 16.84 points to 3,344.80.
But in Hong Kong, the Hang Seng index rocketed 127.93 points, or 2.1%, to 6,325.37. Despite fears that Clinton could revoke China’s most-favored-nation trade status on human rights grounds--a potential blow to Hong Kong--traders said investors were buying on simple relief that the U.S. election was over.
Ironically, foreign trade and foreign policy issues seemed poised Wednesday to move to the forefront of problems that will confront the new President--despite Wall Street’s hope that he will focus on the domestic economy:
* Fear of a trade war between the United States and the European Community mounted after the EC blocked a U.S. effort to put new tariffs on European farm goods. The United States wants to retaliate for what it calls unfair European protection of soybean farmers.
* The price of near-term oil futures on the New York Mercantile Exchange sank 37 cents to $20.33 a barrel as new OPEC production figures showed a surge in output by Iran in October--at a time when U.S. and world oil inventories have been rising faster than demand.
Also, traders speculated that Iraq will attempt to press the Clinton White House to ease the embargo placed on Iraqi oil exports after the Gulf War.
Some traders say oil could soon fall below $20 a barrel, which while good for the economy would also resurrect debate over America’s long-term energy policy--and specifically, whether beleaguered U.S. energy companies should be given new incentives to explore in this country.
* Rumors of a coup against Russian President Boris Yeltsin sent the dollar up, though traders said the dollar also may have benefited from expectations that Clinton will boost U.S. economic growth. In New York, the dollar closed at 1.573 German marks and 123.05 Japanese yen, up from 1.568 marks and 122.40 yen on Tuesday.
Elsewhere, near-term gold futures slipped 40 cents to $337.10 an ounce, while silver jumped 6.5 cents to $3.84 on New York’s Comex.
Among stock market highlights:
* Declining issues outnumbered advancers 10 to 7 on the New York Stock Exchange, as volume totaled 194.4 million shares. But smaller stocks continued to outperform blue chips: The NASDAQ composite index gained 0.94 point to 605.52 despite the Dow’s loss, and winners narrowly topped losers among NASDAQ issues.
Many analysts have argued in recent months that smaller companies would be the principal beneficiaries if President-elect Clinton can jump-start the economy.
* Engineering and capital-equipment stocks that appeared buoyed by Clinton’s election included Fluor, up 7/8 to 45 7/8; Wheelabrator Technologies, up 1/2 to 36; steel maker Nucor, up 1 to 63 1/8; USX-U.S. Steel, up 1/2 to 25 3/8, and machine-tool maker Cincinnati Milacron, up 5/8 to 16 1/2.
But many other industrials were flat to down. International Paper lost 1 1/2 to 64 7/8, Goodyear fell 1 1/8 to 67 3/4, and GM eased 5/8 to 31 5/8.
Also, Southland-based Jacobs Engineering sank 2 1/8 to 27 5/8, despite reporting quarterly earnings up 17%. Analysts said Jacobs’ profit margins weren’t as strong as expected.
* Many technology companies, also expected to benefit from a stronger economy, were sharply higher. Exabyte jumped 1 5/8 to 17 5/8, Hewlett-Packard gained 1 to 59 3/4, Sun Microsystems rose 1 to 34 3/8, Cabletron Systems soared 2 1/8 to 71, and Texas Instruments added 1 1/4 to 50 1/8.
* Drug stocks took a hit. Clinton has vowed to stop spiraling U.S. health care costs in part by restricting drug price hikes. Among the day’s big losers were Alza, off 2 5/8 to 37 1/8; Bristol-Myers, down 2 to 66 1/8; Pfizer, off 2 1/4 to 74 3/8, and Lilly, which fell 1 1/2 to 61 5/8.
* Energy stocks tumbled with the price of oil. Arco lost 1 1/4 to 111 7/8, Halliburton dropped 1 7/8 to 29 1/8, Unocal fell 1 to 23 7/8, Royal Dutch sank 1 5/8 to 81, and Schlumberger tumbled 2 1/8 to 60 1/2.
* Gambling stocks rose after voters in a number of states approved new gaming plans in Tuesday’s elections. Among casino operators, Caesars World jumped 7/8 to 37 1/8, Mirage Resorts added 3/4 to 29 1/4, and Circus Circus gained 3/8 to 53 3/4. Also, slot machine maker International Game Technology jumped 1 1/4 to 44 1/8.
In European markets, Frankfurt’s DAX index lost 12.31 points to 1,472.69 on a bearish outlook from auto maker Daimler-Benz. In London, the Financial Times 100 index eased 13.90 points to 2,691.70 in cautious trading ahead of Parliament’s vote on European unity.
In Tokyo, the Nikkei index added 211.84 points to 17,065.20, though traders saw little reaction to the American election.
Market Roundup, D8
