German Cut Sends Dow Up 39 Points : Market Overview
Blue chip stocks rocketed as a cut in German interest rates fueled hopes of another round of global rate reductions. But small stocks failed to join the advance.
* Treasury bonds staged a strong rally, pushing interest rates down, in the wake of the German rate cut and new signs of slowing U.S. economic growth.
* The dollar tumbled in New York, and early today in Japan it opened at 115.80 yen, a new record low for Tokyo trading.
Stocks
The cut in Germany’s key discount rate to 7.5% from 8.0% was widely expected, but nonetheless seemed to energize some Wall Street traders.
The Dow industrials were strong all day, and surged to a 50-point gain in the final half hour. At the close, however, the Dow was up 38.90 points to 3,465.64.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange.
But while interest in blue chip stocks was strong, NYSE trading volume was moderate at 241 million shares. Also, the NASDAQ market of smaller stocks failed to participate in the rally.
Analysts said a significant portion of the blue chip surge was attributable to trading games in advance of today’s quarterly “triple-witching” expiration of key options and futures contracts.
Among the market highlights:
* The market was led by industrial multinationals that would benefit from a better European economy--if rates there keep falling. Ford jumped 2 7/8 to 51 5/8, Allied Signal rose 1 1/8 to 68 1/2, DuPont added 1 1/4 to 47 7/8, and Cummins Engine rose 2 1/2 to 94.
* Retailers also had a good day. J.C. Penney rose 2 to 88, Sears jumped 1 7/8 to 52 1/2, Woolworth gained 1 1/8 to 31 7/8, and MacFrugal’s Bargains zoomed 1 5/8 to 18 3/4.
* The NASDAQ market was weighed down by continued weakness in many tech and biotech stocks. Apple lost 5/8 to 54 1/2, AST Research slumped 3/4 to 14, Autodesk fell 1 to 43 1/2, and Immunex dropped 2 1/4 to 40 1/2.
Also, Tokos Medical plunged 1 3/4 to 6 3/4 after analysts slashed 1993 earnings estimates.
* Among new issues, Savoy Pictures Entertainment, headed by former TriStar Pictures Chairman Victor Kaufman, went public at 14 1/2 a share and closed at 16 7/8. Savoy’s initial offering of 3.65 million common shares was upped from a planned 2 million shares.
Overseas, European markets were mixed in anticipation of the German rate cut. In Frankfurt, the DAX index added 11.11 points to 1,696.19. But in London, the FTSE-100 lost 10.2 points to 2,879.7.
In Tokyo, the Nikkei index soared again, rising 554.53 points to 18,727.90, a new 1993 closing high.
Other Markets
The bond market rally got back on track, courtesy of the German interest rate cut and expectations of a slowing U.S. economy.
The Federal Reserve Bank of Philadelphia painted a bleak economic outlook: Its March index of regional business conditions fell to 19.6 from February’s 38.8.
Bond yields fell. The yield on the 30-year T-bond was at 6.78%, down from 6.865% on Wednesday. Also, the yield on one-year T-bills dropped to 3.25% from 3.34%.
Analysts said many investors were downplaying last week’s inflation scare. Yet on Thursday, commodity prices jumped sharply again. The Commodity Research Bureau index surged 2.14 points, or 1%, to 211.70.
On the Comex, near-term gold futures jumped $1.50 to $330.80 an ounce, while silver rose 4.8 cents to $3.67. On the New York Merc, light, sweet crude oil for April added 12 cents to $20.29 a barrel.
Meanwhile, the dollar reacted to new expectations of slower U.S. growth rather than the German rate cut. The dollar slid in New York to 1.642 German marks from Wednesday’s 1.662. It also tumbled to 115.65 Japanese yen from 117.20.
Market Roundup, D6
