FINANCIAL MARKETS : Dow Index Edges Up 3.64 as Investors Await Fed Move
Market Overview * The U.S. stock market slipped back into meandering mode Monday, closing mixed despite a surge in markets in Asia and Europe. Traders blamed nervousness ahead of the Federal Reserve’s policy-setting meeting today.
Tokyo stocks bucked the overseas trend, suffering a 3.6% drop on political worries.
* Treasury bond yields inched up, awaiting two note auctions this week. Gold prices also gained, and oil stabilized.
Stocks
Neither blue chips nor smaller stocks could sustain the attempt at a rally that began late last week.
The Dow industrials added just 3.64 points to 3,755.21, and most broader stock indexes were fractionally lower. Trading volume was moderate.
The Nasdaq composite index of mostly smaller stocks inched up 0.92 point to 760.15, but losers still edged winners on Nasdaq.
Analysts said some investors were reluctant to make moves ahead of today’s Federal Reserve meeting. Though the Fed delays for months any public announcement of moves it makes, many analysts believe that the central bank will vote to adopt a policy “bias” in favor of higher interest rates--a reaction to the strengthening economy.
Any actual increase in short-term interest rates by the Fed, however, could be many months away, analysts note. And if the economy slows again in the meantime, the Fed could shift back to a neutral policy, leaving interest rates steady.
Clinton Administration officials, with an eye on the 1994 congressional elections, want any rate increase to come later rather than sooner, perhaps in spring.
“The Administration is saying, ‘Don’t tighten yet. Make sure this recovery is for real,’ ” said economist David Wyss of DRI-McGraw Hill, a forecasting firm based in Lexington, Mass.
Wall Streeters say the stock market can cope with slowly rising interest rates in 1994, as long as corporate profits also are rising with the expanding economy.
For now, however, many large investors are believed to have already closed the books on 1993. The market is expected to drift between now and Jan. 1.
In foreign markets, meanwhile, buyers--many of them American--continue to pour into stocks, extending this year’s big gains.
In London, the FTSE-100 index leaped to a new record, up 27.8 points to 3,364.9. Frankfurt’s DAX index surged 27.14 points to 2,178.16, and Paris’ CAC-40 index gained 27.03 points to 2,223.47.
In Hong Kong, the Hang Seng index rocketed 248.62 points to a record 10,817.48, even though shares on Shanghai’s fledgling market were hit by a sharp selloff.
Mexico City’s Bolsa index also advanced again, up 36.45 points to a record 2,491.02.
In Tokyo, however, the market suffered its biggest one-day point setback of 1993. The Nikkei-225 index tumbled 647.67 points, or 3.6%, to 17,404.24 on worries the government will fail to pull together an economic stimulus plan.
Among U.S. market highlights:
* Some industrial stocks saw buying, on optimism about the economy. Reynolds Metals gained 1 1/2 to 47 5/8, Superior Industries rose 1 to 39 3/8, Graco surged 2 to 34 1/2, Inco added 1/2 to 25 7/8, Cummins Engine gained 5/8 to 51 3/4 and Caterpillar jumped 1 1/4 to 87 5/8.
* Some drug stocks also were in demand. Merck added 1/4 to 33 7/8 amid reports the company is stepping up development of its latest experimental drug against AIDS.
Other winners included Pfizer, up 3/4 to 65 3/4; Warner-Lambert, up 5/8 to 64 5/8; and Schering-Plough, up 5/8 to 64 1/4.
Among biotech issues, U.S. Bioscience fell 1 1/8 to 9 1/4. The Food and Drug Administration has apparently requested that the company supply more information from the trial of its Ethyol ovarian cancer drug.
* On the downside, IBM fell 1 3/8 to 58 3/8 on reports that technical problems will force a delay in the company’s delivery of updated versions of two products.
Other tech stocks were mixed. Motorola lost 2 1/2 to 85 and Texas Instruments eased 1 1/8 to 59 1/2, but Lotus jumped 1 7/8 to 58 1/4 and Powersoft surged 2 to 38 1/2.
* Another formerly high-flying growth stock crashed: Tukwila, Wash.-based Eagle Hardware, a home-improvement center chain, plunged 6 5/8 to 19 1/8 after the company said increased competition has eaten into sales growth.
Today, athletic shoe giant Nike may suffer a hit: After the market closed Monday it reported lower quarterly earnings, and said orders for goods to be delivered between now and April are 14% below year-ago levels.
Other Markets
Bond yields were mostly higher, though only marginally, as the market awaited the Federal Reserve meeting today, and two Treasury note auctions.
The yield on the 30-year T-bond rose to 6.30% from Friday’s 6.28%.
The Treasury will auction $17 billion in new two-year notes today, and $11 billion in five-year notes on Wednesday. Traders said some bond dealers were selling bonds Monday in attempt to drive rates slightly higher, to entice more buyers at the two auctions.
The current two-year T-note yield’s is 4.20%; the current five-year T-note yields 5.20%.
In other markets:
* Gold climbed again, with near-term futures adding $1.90 to $389.30 an ounce on New York’s Comex. Analysts attributed the rally mainly to buying by Middle Eastern investors. Silver also gained, up 9.1 cents to $5.11.
* Crude oil futures were ratcheted around on the New York Merc by dealings related to the expiration of the January contract, which expired Monday at $14.18 a barrel, up 27 cents from Friday. February crude contracts eased 4 cents to $14.38 a barrel.
Market Roundup, D14
