FINANCIAL MARKETS : Dow Up 8.85; Dollar Hits Record Low
Market Overview
* Stock prices pieced together a modest overall gain in a session marked by selling in some computer issues.
* Treasury bond yields rose after Federal Reserve Chairman Alan Greenspan set off inflation alarms by saying business conditions are ripe for a fresh wave of job growth.
* The dollar tumbled to another historic low against the Japanese yen, slipping under the psychologically significant 110-yen level.
Stocks
Alcoa, International Business Machines, International Paper and American Telephone & Telegraph were standouts in the blue chip sector.
News that consumer confidence in May fell to its lowest level since October, far below expectations, had little impact on stocks.
“The market acted surprisingly well when you consider consumer confidence was lousy,” said Gerald Simmons, head of institutional trading at Interstate/Johnson Lane.
The Dow Jones average of 30 industrials rose 8.85 to 3,516.63, on top of a 14.95-point gain in Monday’s mixed session. In the broader market, advancing issues outnumbered declines by about 7 to 5 on the New York Stock Exchange. Big Board volume came to 222.81 million shares, up from 197.99 million in the previous session.
The consumer confidence report was followed later in the day by news that retail sales fell 1.8% in the third week of May.
* Dell Computer, the most active issue in the NASDAQ market, fell 7 1/4 to 24 7/8. The company reported weaker than expected earnings for the fiscal quarter ended May 2, citing poor results from its notebook computers, and said the problems were likely to continue through the next two quarters.
* Apple Computer, another NASDAQ issue, declined 1 1/4 to 56 3/8, and Compaq Computer, traded on the Big Board, lost 1 to 56 3/8.
* But International Business Machines rose 5/8 to 50 3/8. Elsewhere in the blue chip sector, Philip Morris gained 1/2 to 51; Wal-Mart Stores 1/4 to 28 1/4, and AT&T; 1 1/2 to 62.
AT&T; announced plans for a worldwide telephone network with common features and standards.
* AMAX Inc. topped the Big Board volume list, up 4 1/8 to 22 3/4. It agreed to merge with Cyprus Minerals, which fell 1 to 26 5/8. Analysts said the merger will provide the new company with a huge competitive edge in pricing and reap savings in rising environmental costs.
* T2 Medical gained 1 1/2 to 16 7/8. It said a group including some members of its management has had preliminary talks on forming a proposal for the acquisition of T2.
* Glenfed tumbled 1 to 2. A federal appeals court overturned a lower court ruling in favor of Glenfed’s Glendale Federal Bank involving the purchase of failed thrift institutions.
Stocks were firmer in overseas trading. Frankfurt’s 30-share DAX average closed at 1,618.18, up 15.09 points. In Tokyo, the 225-share Nikkei average closed 155.60 points higher at 20,631.76, and London’s Financial Times 100-share average finished 12.1 points higher at 2,837.7.
Credit
The bond market’s selloff came in the afternoon, leaving left most bond prices barely changed from Monday’s close. But participants said Greenspan’s unusually upbeat economic assessment sent jitters through a market already fearful of rising inflation.
The Treasury’s main 30-year bond yield rose to 7.01% from 7.00% the day before. Its price, which was was up 5/16 point around midday, ended down 1/8 point, $1.25 per $1,000 in face value. Its price moves inversely from yield
The selloff came at a particularly bad time for the Treasury’s sale of $15.78 billion in new two-year notes in an experimental Dutch, or single-price, auction. The notes sold at a high yield of 4.17%, slightly better than expectations.
The federal funds rate, the interest on overnight loans between banks, was 3.188%, unchanged from late Monday.
Other Markets
The dollar also lost ground against other key currencies after a report indicated that American consumers have lost faith in the economy’s future.
Currency dealers focused on the yen, betting that more pressure would be brought to bear on Japan to prop up its currency as a means to shrink its bulging foreign trade surpluses.
Brian Dolan, a trader at Dai-Ichi Kangyo Bank Ltd., said the yen buying gathered momentum Monday after remarks by Commerce Secretary Ron Brown, who renewed the Clinton Administration’s concern about America’s $50-billion trade deficit with Japan.
Brown’s comments were reinforced Tuesday as the Administration delivered to Congress a semiannual report on how American trade prospects are being affected by the value of the dollar as measured against other currencies.
The dollar ended in New York at 109.35 Japanese yen, down from 110.60 yen late Monday, and the lowest level ever in the postwar era. The decline was significant, dealers said, because during the dollar’s recent slide against the yen, the U.S. currency has managed to stick at or above 110 yen with only one exception. It closed at 109.86 yen on April 22.
It had been widely assumed that the 110-level was a floor being used for the dollar by international authorities.
The dollar settled at 1.631 German marks, down from 1.637 marks on Monday.
Meanwhile, in commodities trading, gold posted hefty gains in U.S. trading after a mixed showing overseas. On New York’s Comex, gold for current delivery jumped $4.60 an ounce to $378.50.
Gold’s turnaround touched off rallies in the silver market. Silver for current delivery rose to $4.629 an ounce from Monday’s settlement of $4.535.
Elsewhere, light, sweet crude oil for July delivery rose 18 cents on the New York Mercantile Exchange to $19.90 a barrel.
Market Roundup, D6
