Dow Hits 2nd Straight High; Dollar, Gold Up : Market Overview
* A sharp jump in industrial issues lifted the Dow index to a record close for a second straight session Wednesday, but the broad market again closed mixed.
* The dollar surged against the Japanese yen after a U.S. official said the Bank of Japan should target a much weaker yen to spur domestic growth.
* Gold bounded to a four-month high, helped by an increasingly healthy 1994 economic outlook.
Stocks
The Dow industrial average provided the only real market excitement for a second straight day, rising 15.65 points to a record 3,734.53.
In the broad market, most key indexes edged lower, though volume continued to be heavy at 312.5 million shares on the New York Stock Exchange.
Analysts said investors were targeting a fairly narrow group of stocks--mainly cyclical industrial issues--on rising expectations for strong economic growth in 1994.
Indeed, producers of basic metals and chemicals were among the leaders Wednesday. The Federal Reserve Board, in a report on regional economic trends, said business activity is rising in most of the country and that more raw-materials producers are successfully charging higher prices.
Some traders said that fear of inflation in a stronger economy may be what’s holding the broad market back, because investors worry that the Fed will be more inclined to raise interest rates if growth accelerates.
Inflation worries could dissipate today, however, if the government reports a lower than expected increase in wholesale prices for November. On Friday, the government will report on November consumer prices.
Among Wednesday’s highlights:
* Industrial stocks up sharply included Alcoa, up 3 1/4 to 72 1/2; Caterpillar, up 1 1/8 to 85 1/8; Monsanto, up 2 to 73 5/8; ITT, up 2 3/8 to 91 1/8; Harnischfeger, up 1/2 to 23 1/2; Phelps Dodge, up 1 7/8 to 49 1/8, and Reynolds Metals, up 2 7/8 to 47 1/4.
* Gold mining stocks also advanced, following the metal higher. Echo Bay rose 3/4 to 13 1/2, American Barrick surged 1 to 28 1/8 and Newmont Mining leaped 3 to 56.
* Energy stocks were broadly lower. Mobil slumped 1 5/8 to 73 5/8, Chevron lost 1 to 86, Amoco eased 1 to 52 1/8 and Enron tumbled 1 1/4 to 28 1/8.
* Tech stocks were weak overall. Microsoft dropped 2 to 83 1/2 after analysts said the firm will probably miss the target date for its Chicago operating system upgrade. Microsoft said it is on track.
Elsewhere, Lotus Development jumped 2 to 51 3/4 on news of brisk demand for its Notes software product, which allows network users to access, track, share and organize information.
Among other tech issues, Conner lost 5/8 to 13 1/4, Novell slid 1 to 23 1/2, Dell eased 3/4 to 25 and Newbridge Networks dropped 2 1/2 to 54 5/8.
* Among new issues, personal computer seller Gateway 2000 issued 10.9 million shares at 15 each, and the stock jumped to close at 19 1/4 on Nasdaq.
In Mexico City, the Bolsa index’s streak continued. It soared 49.19 points, or 2.1%, to a record 2,433.27. Canada’s major market also hit a new high, with the Toronto Stock Exchange’s 300-stock index surging 42.19 points to 4,307.67.
European markets zoomed. Frankfurt’s DAX index shot up 32.67 points to a record 2,148.13. In London, the FTSE-100 index also hit a record, up 40.1 points to 3,277.4.
But in Tokyo, the Nikkei-225 index dropped 395.54 points to 16,507.95 amid disappointment over delays in government action to bail out the sinking economy.
Dollar
The dollar surged against the yen after Federal Reserve governor Wayne Angell said Japan needs a weaker yen to help its ailing economy.
Angell said Japan’s central bank should target a rate of 120 yen per dollar--far below the dollar’s recent range of 107.50 to 109.50 yen. A weaker yen would help boost Japanese exports.
The dollar climbed as high as 109.15 yen in New York as the news circulated in currency markets, and closed at 108.87, up from 107.45 on Tuesday.
Dealers said Angell’s comments, which appeared sharply at odds with what many still perceive as a U.S. desire for a weaker dollar-yen, caught the market by surprise.
The dollar drifted after Angell clarified that 120 yen was not an official U.S. target, but dealers said it was unlikely the dollar would have been able to sustain the knee-jerk rally in any case.
The dollar was also mostly higher against other key currencies. It closed at 1.707 German marks in New York, up from 1.702.
Other Markets
Gold played catch-up with silver as both precious metals rose to four-month highs on the improving economic outlook.
February gold futures surged $6.40 to $385.70 an ounce on New York’s Comex. March silver gained 6.8 cents to $5.01.
Silver has posted a 12% advance in the past week, due primarily to signs of a pickup in economic activity that could spell increased demand for silver, which is heavily used by industry. Gold also has many industrial uses.
Market Roundup, D10
