Dollar Rallies Against Yen; Stocks Rise
The dollar jumped above the psychologically important level of 100 Japanese yen on Thursday, on growing expectations of a breakthrough in trade negotiations between the United States and Japan.
Stocks, meanwhile, got a small boost from falling bond yields, and both markets were helped by the dollar’s strength. The Dow Jones industrials inched up 10.36 points to 3,730.83.
In New York, the dollar surged to 100.10 yen, up from 98.55 on Wednesday. It was the dollar’s first close above the 100-yen mark since June 27.
The dollar also finished stronger against the German mark, rising to 1.591 marks from 1.574.
Buoying the U.S. currency: American and Japanese trade negotiators were scheduled to meet today for talks, ahead of the Sunday deadline Washington had previously set for deciding whether to take steps toward trade sanctions against Japan.
“There is a suspicion in the market that there will potentially be an agreement before the deadline,” said Peter Gloyne, a currency trader at First National Bank of Chicago.
Without an accord to cut Japan’s huge surplus with the United States, currency markets may figure that a weaker dollar is the Clinton Administration’s only potential weapon in the battle. With an accord, however, markets may assume that the dollar will begin to strengthen again, and that the Administration may abet that.
Talk of the potential for a trade accord took hold in the market even as American officials played down the possibility. Late in the day, Deputy U.S. Trade Representative Charlene Barshefsky, who was to participate in today’s talks, said there had been “minimum progress” in earlier discussions in Hong Kong.
In Tokyo today, the dollar dropped back to 99.75 yen in mid-morning trading.
In the U.S. bond market Thursday, yields pulled back after jumping on Wednesday. The yield on the bellwether 30-year Treasury bond finished at 7.55%, down from 7.61% Wednesday.
Traders said the dollar’s sudden strength was a positive for bonds because a stronger U.S. currency would tend to attract more foreign investment to U.S. securities.
Also lending a degree of support to the bond market was a report by the Conference Board that help-wanted advertising fell in June, suggesting a slower economy.
Markets will get another key look at the economy’s fundamentals today, when the government reports on second-quarter gross domestic product (GDP) growth.
Many economists estimate that GDP expanded at about a 3.8% pace in the quarter. A significantly higher number could spark renewed expectations that the Federal Reserve Board will tighten credit for a fifth time this year.
The stock market, despite a minor rally Thursday, was in a cautious mood ahead of the GDP news.
The Dow had been up as much as 21 points early in the day. In the broad market, advancing issues edged out decliners by just 1,073 to 1,003 on the New York Stock Exchange. Trading volume remained moderate.
Among the market highlights:
* Industrial stocks attracted some renewed buying. 3M Co. gained 1 1/8 to 52 1/2 after reporting record quarterly earnings. Other industrial issues rising on earnings news included Dow Chemical, up 1/2 to 68 1/8; Hercules, up 3/4 to 106, and Duracell, up 7/8 to 41 5/8.
* GM shares inched up 3/8 to 50 1/4 after its earnings beat forecasts. But the stock remains just above its 1994 low of 49 1/2, and well below the high of 65 3/8.
Ford gained 5/8 to 31 and Chrysler edged up 1/4 to 47 3/8.
* Among technology issues, Irvine-based computer maker AST Research lost 1 1/4 to 13 3/4 after reporting quarterly earnings of 43 cents a share, one penny below expectations.
* In the health-care sector, Southland managed-care company Wellpoint Health tumbled 5 1/2 to 25 after its second quarter results fell below analysts’ forecasts.
Wellpoint said it was forced to make higher payments to some of its health-care providers under new California laws and regulatory interpretations that expanded the scope of health benefits offered to small groups and individuals.
* Weakness also persisted in some health-maintenance organization stocks Thursday. U.S. Healthcare fell 1 to 36 1/2, United Healthcare dropped 1 3/8 to 42 3/4 and Foundation Health lost 1 1/8 to 35.
* LDDS Communications gained 1/4 to 19 on a report that it is close to acquiring the Williams Cos.’ WilTel long-distance telephone business for $2.5 billion. Williams shares jumped 1 5/8 to 32 7/8.
But renewed rumors that LDDS will bid for Culver City-based IDB Communications failed to help IDB’s shares. The stock fell 3/8 to 10. LDDS is said to be waiting for a review of IDB’s finances by its new auditors, who were brought in last spring after IDB’s original auditors quit in a dispute with the firm.
* Biogen, which surged 15 1/4 Wednesday on news of promising results in a trial of its drug for treating multiple sclerosis, eased 1 1/8 to 43 5/8.
Overseas, Tokyo’s 225-share Nikkei average closed up 110.62 points at 20,247.85 after briefly falling below the 20,000 mark.
In London, the FTSE-100 index gained 13.6 points to finish 3,095.9. In Frankfurt, the DAX average ended down 17.63 points at 2,122.81.
In Mexico City, the Bolsa index’s five-session winning streak came to a close, as the index fell 4.07 points to 2,429.15.
