Dow Falls 8.10 on Fears Over Moscow Crisis : Market Overview
The stock market fell, weighed down by news from Russia that Boris Yeltsin’s presidency hangs in the balance.
* The dollar plunged to a record low against the yen as investors poured money into the Japanese currency as a safe haven from Russian turmoil.
* Long-term Treasury bond yields edged downward in quiet trading as the market assessed the impact of Russia’s unrest.
Stocks
Blue chip stocks rebounded later in the day to close with only modest losses after investors began to set aside their concern over the crisis in Moscow and focused instead on a rally in the bond market.
The Dow Jones industrial average fell 8.10 points to 3,463.48 on Big Board volume of 233.19 million shares, down from Friday’s 339.66 million. In the broader market, declining issues swamped advances by about 2 to 1 on the New York Stock Exchange.
Early in the day, the index was hammered down nearly 30 points as the market feared the power struggle in Russia would divert President Clinton’s attention from domestic issues.
The NASDAQ index fell 6.10 to 676.62.
Russian President Boris Yeltsin effectively declared direct presidential rule on Saturday, stopping short of dissolving the parliament but assuming the right to overrule the legislature on key issues.
The move not only touched off fresh instability that reached Wall Street but fanned concern that the deficit reduction may be less if defense spending cuts are scaled back over escalating turmoil in Russia, analysts said.
“There’s hope Yeltsin will stand off the communists,” said David Bostian, chief economist at Herzog Heine Geduld. While Russia “is still a wild card,” the stock market generally expected that “ultimately the forces of democracy will triumph,” he said.
The news from Russia sent European stocks sharply lower. Frankfurt’s 30-share DAX average ended 37.41 points off at 1,661.40, its weakest finish since Feb. 25. London shares closed sharply weaker, with the Financial Times 100-share average dropping 36.2 points to 2,863.9. Tokyo’s 225-share Nikkei average finished 247.22 points higher at 18,784.39.
Among the market highlights:
* The Russian crisis bolstered gold company shares. In heavy trading, Homestake Mining was up 1/4 to 13 7/8 and Battle Mountain rose 1/4 at 7 1/4.
* Hewlett-Packard lost 2 3/8 to 73 on the Big Board. A slate of NASDAQ tech shares also fell. Intel was down 3/4 to 113, Sun Microsystems fell 1 to 29 1/8 and Cisco Systems lost 1 5/8 to 43.
* Among energy stocks, Triton Energy added 1 1/2 to 36 5/8. Merrill upgraded its long-term rating. Seagull Energy rose 1 3/8 to 44 7/8.
* Cadence Design tumbled 6 to 10 1/2 after it said a first-quarter loss was likely and it sees a fall in revenue.
* Chiron Corp. added 1 1/8 to 51 1/2. First Boston and Prudential Securities upgraded their ratings on the firm after a Food and Drug Administration panel recommended its drug for multiple sclerosis.
* Prudential upgraded three other biotechnology stocks. Amgen rose 2 to 35, Biogen added 2 to 35 and Genelabs rose 7/8 to 6.
* Drug stocks tumbled again. Pharmaceutical companies have seen their issues plunge on uncertainty over the Clinton Administration’s health care policy. Merck fell 3/8 to 35 3/4, while Glaxo fell 3/8 to 17 3/4.
* Philip Morris lost 7/8 to 63 1/4. Tobacco stocks have been hit by talk of new taxes on alcohol and cigarettes to pay for the health care reforms.
* Tenneco fell 3/8 to 47 3/4 after saying it will take a $920-million charge to restructure Case Corp., its beleaguered farm and construction equipment division.
* Marvel Entertainment jumped 4 1/4 to 23 3/4 after MacAndrews & Forbes Holdings said its unit, New Marvel Holdings Inc., intends to make a cash tender offer for up to 11 million shares of Marvel at $25 a share.
* Dell Computer shares fell 3/4 to 34 1/2 after the company said it was cutting prices on some 486-based systems by as much as $300.
Currency
Although the dollar lost ground to the yen, it benefited against European currencies, which were beaten down by the uncertainty surrounding the events in Moscow.
In New York, the dollar briefly touched a new postwar low of 115.30 Japanese yen before settling at 115.63 yen, down from late Friday’s 116.10 yen.
Dealers said the yen’s surge against the dollar was partly fueled by the Tokyo stock market’s rally.
The yen and the dollar were both bolstered by Yeltsin’s assumption of special powers.
Currency traders initially sold marks on fears of upheaval in that region, causing an overnight dollar rally. The dollar later shed some of the gains.
“The situation in Russia has put a floor under the dollar for the moment. What you had was more selling of deutsche marks and selling of European currencies rather than any inherent dollar strength,” said Ronald Holzer, chief dealer at Harris Trust & Savings Bank in Chicago.
The greenback rose to 1.638 German marks, up from 1.634 Friday.
The British pound fetched $1.487, less than late Friday’s $1.492.
Credit
Prices fell in the tax-exempt market as the market braced for an estimated $5 billion in new supply this week. The higher yields led some municipalities to pare back their planned sales.
The yield on the key 30-year bond slipped to 6.80% from 6.81% on Friday. The price rose 3/32 point, or about 94 cents per $1,000 in face value. Prices and yields move in opposite directions.
The market initially fell by as much as 1/2 point, extending Friday’s losses, but later recovered.
Frank Marchetti, a bond trader for Fuji Securities Inc., said the bond recovered mostly on so called short-covering.
Short sellers sell borrowed investments, hoping that if the prices decline, they can by them back at a lower price, then repay the loan and pocket the difference. Short-covering occurs when traders make those purchases.
The bond also may have been helped by a decline in the Commodity Research Bureau index, which measures commodity prices on a daily basis and is considered a barometer of broader price moves. Higher inflation erodes the value of fixed-income securities like bonds so any softening of price increases is good news.
The federal funds rate, the interest on overnight loans between banks, edged up to 2.938%from 2.875% late Friday.
Commodities
The precious metal and oil markets, which also have fundamental ties to Russia, displayed little concern about the leadership struggle.
“Past history indicates that unless there’s a near civil war-type atmosphere, the normal export patterns for metal and energy products would not be impacted,” said William O’Neill, senior futures strategist with Merrill Lynch Futures in New York.
On the New York Commodity Exchange, gold settled at $332.90 an ounce, up $1.00 from Friday. Silver fell 0.3 cent to $3.674 an ounce.
In energy trading on the New York Mercantile Exchange, April light, sweet crude oil fell 56 cents to $19.52 a barrel.
Market Roundup, D8
