Dow Rallies After EC Acts on Currencies : Market Overview
Stocks rallied Monday amid hopes that measures taken by European finance ministers to restore calm to their currency markets will bring lower interest rates to the recession-bound nations.
* Long-term Treasury bond yields retreated slightly in moderate activity, as traders reacted to fears of higher interest rates and news of reduced government borrowing.
Stocks
The market moved steadily higher after the European Community agreed to relax the terms of its Exchange Rate Mechanism, hoping to fend off speculative currency attacks.
That gave European nations more room to lower the cost of borrowing, which in the long run could create a larger market for U.S. exports.
The Dow Jones industrial average rose 21.52 points to 3,560.99, on Big Board volume of 230.38 million, down from 254.42 million on Friday. In the broader market, advancing issues outnumbered declines by about 3 to 2 on the New York Stock Exchange.
The turmoil in the currency markets began after Germany’s decision Wednesday not to lower a key interest rate. On Friday, stocks tumbled as speculation rattled the monetary system.
Stocks rose in Europe on the news, providing more fuel for the U.S. rally. In London, the Financial Times 100-share average closed up 15.2 points at 2,941.7. In Frankfurt, the DAX 30-share average gained 11.85 points to end at 1,815.08. However, Tokyo’s 225-share Nikkei average fell 36.61 points to 20,343.53.
Also propping up U.S. stocks was a slightly better than expected report on manufacturing from the National Assn. of Purchasing Management.
The group’s index rose to 49.5% in July, up from 48.3% in the previous month and higher than the 48% economists had expected.
* Multinational companies were big gainers. Eastman Kodak rose 1/2 at 54 1/8, General Motors was up 1 1/8 at 49 5/8, and Minnesota Mining shot up 1 3/8 at 106 3/8.
* Among other gainers, Motorola soared 3 3/4 to a new 52-week high of 94 3/8 on news that the company completed the first-round, $800-million equity offering of its Iridium satellite communications network.
* The NASDAQ composite index jumped 2.96 to 707.66. Microsoft fell 1 1/4 to 72 3/4.
Credit
The Treasury Department said its estimated borrowing needs in the third quarter will be $58.3 billion, considerably less than the $90 billion to $95 billion it estimated on May 3.
That news, in advance of the Treasury’s announcement Wednesday of the details of its quarterly refunding of three-year, 10-year and 30-year securities, caused some traders to reconsider their strategies.
The 30-year bond yield dipped to 6.55% from 6.65% Friday. Its price was up 1/8 point, or $1.25 per $1,000 in face value. Prices and yields typically move in opposite directions.
The federal funds rate, the interest on overnight loans between banks, was 3.25%, up from 3.063% late Friday.
Commodities
Gold prices fell on the New York Commodity Exchange. Gold for current delivery fell to $405.90, off $1.10 from Friday’s close. Silver closed at $5.443 an ounce, up 5.1 cents.
In energy trading on the New York Mercantile Exchange, light sweet crude oil for September delivery rose 9 cents to $17.97 a barrel.
Market Roundup, D8
