FINANCIAL MARKETS : Russian Chaos Keeps Investors on Sidelines : Market Overview
The stock market ended narrowly lower as cautious investors sat on the sidelines waiting for more news on the political situation in Russia and on the U.S. economy.
* Long-term Treasury bond yields fell amid a surge in new municipal issues as states and cities, flush with cash from the sales, quickly squirreled the money away in U.S. government securities.
* The German Bundesbank injected anxiety into the foreign exchange market with an interest-rate announcement that sent the dollar skidding against the mark and most other major European currencies.
Stocks
Stocks traded in a narrow range throughout the day as U.S. investors remained on edge, even though tensions seemed to ease slightly in Russia.
The Dow Jones industrial average was down 1.62 points to 3,461.86, while in the broader market, declining issues narrowly outnumbered advances on the New York Stock Exchange.
Big Board volume totaled 231.87 million shares, about even with Monday’s 233.19 million.
The Russian Constitutional Court ruled that President Boris N. Yeltsin acted improperly in seizing new powers over the weekend, but apparently found no grounds for his removal from office.
Investors fear that if the United States is forced to increase foreign aid to Russia and also halt cuts in defense spending, America’s hopes for a peace dividend could be seriously jeopardized.
In recent months, the stock market has rallied on expectations that savings from heavy cuts in defense spending can help reduce the federal budget deficit.
In overseas trading, stocks ended lower in Tokyo on concerns about the situation in Russia and the rising yen. The 225-share Nikkei average finished 292.77 points lower at 18,491.62.
In Frankfurt, the 30-share DAX index closed down 12.96 points to 1,648.44.
London’s Financial Times-100 shares shed 2.8 points to finish at 2,861.1.
Among the market highlights:
* Drug stocks rallied as investors hunted for bargains among the depressed issues. Drug stocks had plunged on uncertainty over President Clinton’s health care policy. Merck rose 1 1/4 to 37, Bristol-Myers Squibb added 1 to 58 1/8, Eli Lilly gained 1 to 47 1/4, Johnson & Johnson rose 1 1/8 to 40 5/8, Pfizer was up 2 1/8 to 59 7/8, and Warner Lambert gained 1 3/8 to 68 1/2.
Airline stocks also rose after the industry reached a settlement in a price-fixing lawsuit.
* AMR Corp., the parent of American Airlines, rose 1 3/4 to 63 7/8, Delta Air Lines gained 2 to 51 7/8, and UAL Corp. shot up 3 1/4 to 120 3/8.
* In other active NYSE issues, First Data rose 1 1/8 to 33 after a secondary offering of 32 million common shares was priced at $32 each.
* Avon Products lost 1 1/2 to 59 7/8 after the company was ordered by a California arbitrator to pay $20.4 million to a past chief executive of one of its former units.
* Tenneco was lower for a second day, down 2 at 45 3/4 after reporting poor earnings on Monday.
* In NASDAQ trading, Retix plummeted 3 5/8 to 6 1/2 after forecasting lower first-quarter earnings. ASK Group was down 3 at 20 5/8 after analysts cut earnings estimates on the computer systems company.
Credit
The renewed burst of demand from municipalities came during a lightly traded Treasury market. Traders were treading cautiously ahead of the auctions of $15.25 billion in two-year notes today and $11 billion in five-year notes on Thursday.
The yield on the Treasury’s 30-year bond fell to 6.76% from 6.80% late Monday, boosting its price by 7/16 point, or about $4.38 per $1,000 in face value. Prices and yields move in opposite directions.
The municipal market, meanwhile, digested an estimated $1.8 billion in new issues Tuesday. Among the biggest was $579 million in revenue bonds offered by the Los Angeles Department of Water & Power, with the lead underwriter Prudential Securities.
The federal funds rate, the interest on overnight loans between banks, was 2.938%, unchanged from late Monday.
Other Markets
During European currency trading, Germany’s central bank announced an agreement to repurchase money market securities as a way to supply banks short of cash with fresh funds. In a repurchase agreement, the Bundesbank buys securities from the banks with a preset agreement to sell them back.
Currency traders feared that the resulting demand for short-term funds would drive rates higher, further hurting demand for dollars after last week’s disappointing rate cut by the Bundesbank.
The high rates drove investors to mark-denominated investments and hurt demand for the dollar and other currencies used to buy lower-yielding investments.
In New York trading, the dollar was quoted at 1.630 deutsche marks, down from late Monday’s 1.638.
The Japanese yen, meanwhile, after spurting overseas to another record postwar high against the dollar, lost some of its gains in New York.
The U.S. currency settled at 115.70 Japanese yen. But the dollar rose in New York to 115.95 yen from late Monday’s 115.63 yen.
Meanwhile, oil prices rose, partly making up for a slide the day before. Light, sweet crude oil for delivery in May, which fell 46 cents Monday, rose 27 cents Tuesday to settle at $20.03 a barrel on the New York Mercantile Exchange.
Gold prices retreated after moving higher Monday. On the Commodity Exchange in New York, gold for current delivery closed at $331.90 an ounce, down $1, and silver slipped 2.8 cents to $3.646 an ounce.
Market Roundup, D6
