FINANCIAL MARKETS : Dow Index Rises 17.89 After Surprise Rally
Market Overview The stock market staged a surprise turnaround amid heavy trading Wednesday.
* The 30-year Treasury bond yield closed unchanged at 5.97% after shooting higher in early trading in a rocky session of mainly technical trading.
Stocks
Virtually every sector of the jittery market turned lower in early trading, but by midday stocks appeared to stabilize as bond yields started to inch downward. An hour before the close, the Dow Jones industrial average surged solidly into positive territory.
The Dow, which had been off as much as 30 points, closed at 3,633.65, up 17.89.
Big Board volume totaled 298.26 million shares, up from Tuesday’s 258.65 million. Declining issues outnumbered advancing ones by a thin margin on the New York Stock Exchange.
“The market came back with the bond market,” said Mark Donahoe, a managing director at Piper, Jaffray Inc. in Minneapolis. “When the bond market upticked, stocks upticked. It was a big reversal.”
Among the market highlights:
* Paramount Communications jumped 1 3/8 to 64 1/2 as traders bet that a bidding war may yet erupt for the entertainment company, which agreed this week to merge with Viacom Inc.
Sources said that cable TV titan John Malone and QVC Chairman Barry Diller continue to weigh the merits of a bid, which they nearly launched earlier in the summer. If a rival bid materializes, however, traders are betting that Viacom will ultimately prevail by sweetening its offer.
Meanwhile, Viacom B shares added 1/4 to 55 5/8, while the Class A shares were unchanged at 61 1/2.
* Disney fell 1 1/2 to 39 1/8 in heavy trading. Analysts said the recent violent deaths of several tourists in Florida may be making some investors edgy about future attendance at Disney World in Orlando.
* The broad-based advance on NASDAQ was led by computer chip giant Intel, which rose 1 5/8 to 64 7/8 after it was picked as Merrill Lynch’s focus stock of the week.
* Gold mining stocks continued to rebound. American Barrick rose 5/8 to 22 1/4, Hemlo added 3/8 to 8 3/4 and ASA Ltd. gained 3/4 to 40.
Overseas trading was somewhat thin, with Japanese financial markets closed for a national holiday. Frankfurt’s 30-share DAX average closed down 20.18 points at 1,860.39, while London’s Financial Times 100-share average closed at 2,989.4, a 38.6-point drop.
Credit
After falling more than a full point in the morning, the bellwether 30-year Treasury issue crept back to end unchanged.
The bond’s yield held at 5.97%, while its price finished down 1/32 point, or 31 cents per $1,000 in face value. The 30-year yield fell 1 7/16 points Tuesday.
The session was marked by volatility. With little new economic data moving the market, traders blamed the long bond’s early surge to carry-over selling from Tuesday’s drop, which was prompted by inflation worries. Inflation erodes the value of fixed-income investments such as government bonds.
But there were no signs of inflation in commodities indexes or the prices of closely watched commodities such as gold or oil.
“It really seems to be driven by professionals in the marketplace,” said Steven R. Ricchiuto, chief economist at Barclays de Zoete Wedd Securities Inc.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.25%, up from 3.00% from Tuesday.
Other Markets
The dollar fell against most major currencies in technically oriented trading influenced by a surge of interest in the German mark in Europe.
The dollar closed in New York at 1.595 German marks, down from 1.609 on Tuesday.
In New York, the dollar finished at 105.98 Japanese yen, up from 105.83 on Tuesday.
Meanwhile, gold for current delivery closed at $347.50 an ounce, up $2.70 from Tuesday. Silver for current delivery closed at $3.976 an ounce, up 0.4 cents.
On the New York Mercantile Exchange, light, sweet crude oil for October delivery slipped 10 cents to $16.86 a barrel.
Market Roundup, D6
