Dollar Climbs, Pulling Stocks, Bonds With It
The dollar rebounded from its postwar low against the Japanese yen Wednesday, bringing relief to stocks and bonds, whose fortunes had sagged this week along with the ailing U.S. currency.
But prices plunged in commodities ranging from grains to gold, taking a closely watched inflation index sharply lower.
The dollar had tumbled through the key psychological level of 100 yen Tuesday as the Federal Reserve Board showed no signs of defending the greenback, prompting traders to quote ever lower dollar-yen rates in a test of the central bank’s resolve.
Comments Wednesday by Treasury Secretary Lloyd Bentsen, who said the United States and other industrial nations are ready to act if necessary in response to the recent plunge in the dollar, helped shore up sentiment in financial markets.
“I’m concerned by recent movements in the (foreign) exchange markets,” Bentsen said in a statement. “We are carefully monitoring developments.”
The comment was viewed as a warning to currency speculators that intervention, involving massive dollar purchases as well as a hike in U.S. interest rates, is possible.
The dollar recovered in late New York trading to close at 100.95 Japanese yen after crumbling Tuesday to a new post-World War II low of 100.35.
Against the German mark, the dollar rose to 1.605 marks from 1.594 on Tuesday.
The steadier dollar and falling bond market interest rates after several unsettled sessions helped the stock market snap a three-session string of losses that clipped more than 97 points from the Dow Jones industrial average.
The Dow finished up 16.80 on Wednesday at 3,724.77, well below its best levels of the day.
In the broader market, advancing issues outpaced declines on the New York Stock Exchange by about 3 to 2. Big Board volume fell to 251.11 million shares, down from 298.73 million Tuesday.
Among market measures comprising a wide range of stocks, the NYSE composite index rose 0.87 to 249.97, and Standard & Poor’s 500-stock index rose 1.75 to 453.09.
The Nasdaq composite index of mostly smaller issues advanced 3.95 to 712.74, thanks largely to a recovery in technology issues.
Wall Street reacted calmly to comments about the economy by Fed Chairman Alan Greenspan, who testified before Congress.
On general economic matters, the Fed chief said the outlook for further growth is bright, and he implied that additional interest rate hikes aren’t imminent.
But Greenspan’s remarks to the House Budget Committee didn’t put worries about the dollar completely to rest. He said the Fed must be mindful of the dollar’s movements and that the central bank, along with the Treasury, is monitoring the currency closely.
The inflation-wary bond market found added relief from dramatic declines in commodity prices, which were largely attributed to dips in precious metals.
The Commodity Research Bureau’s index of 21 commodities, which recently jumped to a 3 1/2-year high, skidded for the third consecutive day, sinking 3.42 points to 230.87.
The index dropped on declines in grain prices, livestock, cotton, coffee, cocoa, sugar, energy and precious metals.
Gold fell $4.80 on the New York Comex to close at $389.50 per ounce.
The yield on the Treasury’s key long bond plunged to 7.40% from 7.49 on Tuesday. Its price, which moves in the opposite direction, shot up 1 point.
Bonds also got a shot in the arm from unexpectedly robust demand for new five-year notes sold by the Treasury.
Among stock market highlights:
* Silicon Graphics spurted 2 3/4 to 21 3/4 after the company and AT&T; announced a joint venture to sell “video servers” that will deliver TV programs, movies and music through communications systems such as AT&T;’s long-distance network. AT&T; was unchanged at 55 3/8.
* General Electric lost 1/4 to 45 7/8 after the company said the chief executive of its Kidder Peabody brokerage unit, Michael A. Carpenter, had resigned.
* Zenith Laboratories fell 1 3/4 to 14 1/8. It said it received a warning letter from the Food and Drug Administration on testing procedures at a plant in Puerto Rico.
* Intel was up 1 3/8 to 59 1/4 and Oracle Systems rose 1 1/4 to 36 1/2.
* Sheffield Medical Technologies, a medical development company, climbed 1 3/16 to 5 3/4 on news that it acquired a worldwide license to an HIV-AIDS vaccine technology under development.
* American Paging fell 1 5/8 to 6 5/8 after saying late Tuesday that its operating income and cash flow over the next few quarters may be lower than expected.
* Argosy Gaming rose 1 to 13 1/2. It said it opened a casino in the Kansas City area.
Recoveries on European stock markets helped put American investors in a buying mood. London’s Financial Times-100 average rose 20.2 points to close at 2,960.4 points, while Frankfurt’s DAX average ended at 1,994.42, up 11.15 points. Share prices also closed higher in Paris and Zurich.
Earlier, in Tokyo, the Nikkei 225-share average ended down 231.84 points at 20,581.32, and Mexico City’s Bolsa index was down 0.06 point at 2,257.63.
