Blizzard Boosts Commodities; Rates Also Rise
Market Overview
A summary of Monday’s trading activity, as compiled from Times staff and news service reports.
* Commodity prices rocketed, led by sugar, in the aftermath of damage wrought by the eastern blizzard.
* Treasury bond yields rose further as the jump in commodity prices rekindled long-dormant inflation worries.
* Stocks advanced despite the commodity and bond market moves. The Dow Jones industrials added 14.59 points to 3,442.41.
Commodities
The eastern blizzard helped send prices of many commodities higher, propelling the widely followed Commodity Research Bureau index up 2.40 points, or 1.2%, to a nine-month high of 210.19.
Sugar led the commodity advance: Raw sugar for May delivery leaped 0.95 cent on New York’s Coffee, Sugar & Cocoa Exchange to 11.50 cents a pound, the highest settlement for a near-term contract since Aug. 24, 1990.
The Mexican news agency Notimex reported heavy damage to Cuban farms, including sugar cane fields, from the storm that roared out of the Gulf of Mexico.
Port and processing facilities also were reported to have been damaged, said Arthur Stevenson, sugar analyst with Prudential Securities Inc. in New York.
“Since they already lacked spare parts, restoring those processing facilities will be difficult,” he said.
Stevenson stressed that it is too early to know the scope of the damage. He said the Cuban sugar harvest was running more than 20% behind the normal pace, so much of the crop may have been exposed to the storm.
In other commodity markets:
* Orange juice futures rose on worries that tree blossoms in Florida have been damaged by wind and freezing cold, affecting next year’s production. May juice futures gained 3.2 cents to 78.10 cents a pound at the Cotton Exchange.
* Storm-related buying also helped boost livestock futures. A hard winter in the Midwest had already pushed cattle and hog prices up, on the expectation that animals in the fields are carrying less weight. In Chicago, May pork bellies jumped the 2-cent limit to 49.25 cents a pound.
* Grain prices zoomed after Russian President Boris Yeltsin appeared to solidify his grip on power, which could mean more U.S. grain credit to Russia. In Chicago, May wheat added 4.75 cents to $3.27 3/4 a bushel; May soybeans rose 3.75 cents to $5.80 1/2 a bushel.
* Precious metals were pushed up on overall inflation concerns. April gold rose $1.30 to $329.30 an ounce on New York’s Comex. March silver rose 3.5 cents to $3.65.
* Energy markets closed relatively dull despite the blizzard. Near-term light, sweet crude oil futures fell 13 cents to $20.16 a barrel on the New York Merc.
Credit
Bond yields rose for a second session as the latest jump in commodities fanned inflation fears.
Bonds had been slammed Friday when the government reported a surprisingly large jump in February wholesale prices. The yield on the Treasury’s 30-year bond had jumped from 6.76% last Thursday to 6.86% Friday.
Monday, the yield rose further, closing at 6.89% after reaching 6.93% at midday. Yields on shorter-term bonds also inched up.
But activity was relatively light, slowed by many traders’ absence as the East dug out of the blizzard.
Analysts said inflation concerns have now become a major roadblock to further declines in interest rates. However, most traders don’t believe that long-term interest rates can rise substantially as long as the Federal Reserve keeps short-term rates low.
Elsewhere, in currency trading, the dollar ended mostly lower in quiet turnover. In New York, the dollar finished at 118.65 Japanese yen, up from 118 on Friday, and at 1.663 German marks, versus 1.664.
Stocks
Wall Street pretty much shook off the trouble in commodity and bond markets.
The Dow’s gain of 0.4% was matched by most other major indexes. More important, advancing issues outnumbered declines by about 11 to 9 on the New York Stock Exchange and on NASDAQ.
Volume, however, was the slowest yet this year, at 195.9 million shares on the NYSE. Activity was restrained after the blizzard, as many traders stayed home.
Also, major brokerage Goldman, Sachs & Co. was forced to halt its trading operations after a fire forced evacuation of some of its offices in lower Manhattan.
Among the trading highlights:
* The commodity rally may have helped key producers of basic industrial goods. Many of them might actually benefit from a little inflation because they could raise prices more easily.
Gainers included Alcoa, up 1 1/4 to 70 3/4; International Paper, up 1 1/8 to 65 1/8; Phelps Dodge, up 5/8 to 51 5/8; Georgia-Pacific, up 2 1/4 to 65 1/2, and Oregon Steel, up 1 5/8 to 23 5/8.
* Technology stocks were strong. Intel rose 1 to 118 5/8, Apple gained 3/4 to 57, Dell jumped 1 3/8 to 38 3/4, Oracle zoomed 1 1/2 to 36, and Cisco Systems added 1 1/2 to 95 3/4.
* Other big gainers included Nike, up 4 5/8 to 76 3/8 after reporting solid third-quarter earnings, and California HMO TakeCare, up 3 3/4 to 34 1/2 after announcing plans to buy a Colorado HMO.
* On the downside, Lilly lost 1 to 50 3/4 and is likely to slide further today. After the market closed, the drug giant said first-quarter earnings will be about $1.20 to $1.30 a share, down from $1.51 a year ago. Lilly blamed competitive pressures and a mild flu season.
* BankAmerica lost 1 3/8 to 52 3/8. Two brokerages cut earnings estimates after meeting with the firm’s chief financial officer last week.
Overseas, London’s FTSE-100 index added 6.5 points to 2,922.4, while Frankfurt’s DAX index eased 4.57 points to 1,702.57.
In Tokyo, the Nikkei index rose for the seventh consecutive day, adding 48.66 points to 18,086,18.
In Hong Kong, however, the Hang Seng index plunged 317.87 points, or 5.2%, to 5,854.61 as a new war of words erupted between China and Britain.
Market Roundup, D8
