Dow Up 16; Dollar Rally Continues : Market Overview
Stocks closed higher in a rally built on strong gains in high-profile shares such as General Motors, Minnesota Mining & Manufacturing and Allied-Signal.
* The dollar surged by nearly a yen in an extension of Friday’s powerful rally, as expectations persisted for political uncertainty in Japan and economic stagnation in Germany.
* Treasury bond yields sagged to six-week lows, strengthened by positive sentiment toward President Clinton’s deficit-reduction plan and the dollar’s further gains.
Stocks
Stocks bounced back from Friday’s late selloff, which was tied to the quarterly expirations of stock index futures, stock index options and options on individual stocks.
The Dow Jones industrial average rose 16.05 points to 3,510.82 on Big Board volume of 223.65 million shares, off sharply from Friday’s 2300.50 million. In the broader market, advancing issues outnumbered declines by about 11 to 8 on the New York Stock Exchange.
Analysts attributed Monday’s upward move partly to the renewed strength of the U.S. currency, which on Friday ended a five-month down period against the Japanese yen. On that day, Prime Minister Kiichi Miyazawa received a no-confidence vote from Parliament, forcing him to call early elections.
Stock and bond investors had been unsettled by the weak dollar, which carries the threat of inflation because it makes imported goods more expensive at home and encourages domestic producers to raise prices.
In addition, there had been fears the Federal Reserve Board might raise interest rates to support the dollar. Low interest rates make stocks more attractive than interest-bearing investments and let companies borrow for less.
The stronger dollar “adds an element of support for the stock market,” said Alfred Goldman, director of technical market analysis at A.G. Edwards & Sons in St. Louis.
The rising dollar also helped lift bond prices, which in turn gave additional support to stocks, Goldman said. Rising bond prices means lower yields, which move in the opposite direction.
In large part, however, individual company news drove stock prices Monday, said Michael Metz, an investment strategist at Oppenheimer & Co.
“There is still a lot of money looking for employment in stocks, but investors are selective and slightly gun-shy,” Metz said.
Among the Market highlights:
* General Motors rose 1 1/8 to 42 7/8 after the company’s chief executive made positive comments about U.S. vehicle sales this year. Other auto stocks followed GM higher, with Ford jumping 1 1/8 to 51 1/8 and Chrysler rising 3/4 to 46 3/8.
* Pfizer fell 2 1/8 to 70 after the stock was downgraded by an Alex Brown & Sons Inc. analyst.
* Damon Corp. rose 1 7/8 to 15 3/4 after National Health Laboratories said it has entered into a definitive agreement to acquire the company.
* Nike dropped 4 1/8 to 57 7/8 after saying fiscal 1993 earnings will fall below market expectations. Nike B stock fell 9 1/8 to 57 7/8.
* Home Shopping Network lost 1/2 to 10 after a newspaper article reported new allegations against the company that suggest a pattern of questionable business practices.
* Tambrands rose 6 1/8 to 46 1/4 after it was reported the board is seeking to sell the company, possibly to Johnson & Johnson.
In NASDAQ trading, Snapple Beverage fell 3 to 36 after media reports that the company’s share price might be too high and that competition is increasing.
Overseas, Frankfurt’s 30-share DAX average finished up 2.92 at 1.689.82 and London’s Financial Times 100-share average climbed 24.0 points to 2,903.4.
Currency
The dollar’s new bullish tone has put a halt to more than four months of appreciation in the Japanese yen, and participants expect the U.S. currency to rise even further this week as it breaks above key resistance levels.
On Friday, the dollar rose more than 2 yen and more than 2 pfennigs after Japanese Prime Minister Kiichi Miyazawa lost the support of members of his own party as many of them joined in a no-confidence vote in Parliament. He dissolved the lower house for early elections, a vote that is expected to be held in July.
The dollar continued to build on that momentum Monday in Tokyo, where world currency trading begins. The dollar closed there at 110.48 yen, up 3.08 yen from Friday’s close.
Later in New York, the dollar fetched 110.65 yen, up from late Friday’s 109.75 yen.
The dollar also gained new ground against the German mark Monday. In New York, it closed at 1.688 German marks, up from 1.681 late Friday.
The British pound fell to $1.489 from $1.497 late Friday.
Other Markets
The gains came in light trading and were not shared by shorter-term maturities, which ended mostly unchanged ahead of a surge in new Treasury supply this week.
The yield on the Treasury’s main 30-year bond fell to 6.78% from late Friday’s 6.80%, and its price, which moves in the opposite direction, rose 11/32 point, or $3.44 per $1,000 in face value. The last time the long bond’s yield closed that low was May 5.
Short-term Treasuries were unchanged to 1/16 point higher, and intermediate maturities rose 1/8 point to 3/16 point, the financial information service Telerate Inc. reported.
The federal funds rate, the interest on overnight loans between banks, was 2.938%, up from 2.875% late Friday.
In commodities trading, gold was mostly lower on world markets. On the Commodity Exchange in New York, gold for current delivery declined $1.30 an ounce to $370.00. Silver also fell, declining 0.3 cent an ounce to $4.281.
Elsewhere, on the New York Mercantile Exchange, light, sweet crude oil for July delivery fell 5 cents to $18.62 a barrel.
Market Roundup, D8
