FINANCIAL MARKETS : Dow Revives; Bonds, Buck Weaken
Blue chip stocks snapped a three-session losing streak Tuesday in quiet trading, even as long-term bond yields rose again and the dollar weakened.
The Dow Jones industrial average added 13.12 points to 3,898.70, buoyed largely by action in American Express, General Motors and Eastman Kodak stocks.
The broad market also fared reasonably well, analysts said, given the backdrop of a jittery bond market. Though declining issues outnumbered advances by about 6 to 5 on the New York Stock Exchange, broad indexes such as the Standard & Poor’s 500 and the Nasdaq composite inched higher.
Big Board volume fell to 199.9 million shares, the lowest since July 5, as many traders and investors extended their Labor Day weekend holiday or stayed away for Rosh Hashanah, the Jewish New Year.
“The problem (Tuesday was) a lack of buyers rather than an abundance of sellers,” said David Holt, director of technical research at Wedbush Morgan Securities in Los Angeles. “It’s difficult to come back from a three-day holiday and start doing anything immediately.”
In the bond market, sellers dominated a slow session. A weak dollar undercut bonds, as did lingering worry about inflation after last Friday’s August employment report.
That report showed slower-than-expected job creation, but some economists nonetheless warn that demand for workers is becoming strong enough to raise fears about wage inflation.
The yield on the Treasury’s 30-year bond, which rose from 7.45% on Thursday to 7.49% on Friday, rose further to 7.53% on Tuesday. Shorter-term bond yields also rose.
In the currency market, the dollar weakened further against key currencies, extending last week’s selloff, on rising demand for German marks and pessimism about U.S.-Japanese trade talks.
Trading volume was light, which exaggerated the extent of the dollar’s moves. But U.S. foreign exchange traders returning from the three-day weekend said the underlying selling pressure on the dollar was strong. They foresaw little reason to buy dollars. The greenback closed in New York at 1.543 German marks, down from 1.556 on Friday. It also weakened to 98.64 Japanese yen, down from Friday’s 99.12.
Among the stock market highlights:
* American Express surged 1 3/8 to 30 3/8 after the company launched a credit card it says is a better deal for users who don’t pay off balances right away. The stock may also have been helped by recurring takeover rumors.
* Kodak shares jumped 1 1/8 to 51 1/4 after the company agreed to sell its Clinical Diagnostics unit to Johnson & Johnson for $1 billion in cash.
* Retail stocks were broadly higher on encouraging sales reports from last week, as shoppers apparently snapped up back-to-school clothes and other merchandise. Nordstrom rose 1 to 46 3/4, J.C. Penney gained 3/4 to 52 3/4, Sears added 3/4 to 47 1/2 and Tandy jumped 3/4 to 42.
* Auto stocks also rose on new sales reports, led by GM, up 2 1/8 to 52 1/4. Ford added 3/8 to 30 and Chrysler was up 1 to 48 1/2.
* Some technology shares rebounded. FileNet rose 1 to 23, Motorola jumped 1 1/2 to 53 1/4, Oracle gained 1 1/4 to 42 3/4 and Sybase surged 2 1/4 to 47 3/4.
* Casino stocks were mostly higher on rumors that Hilton Hotels may be a takeover target. Hilton jumped 5 5/8 to 64 3/8, though it denied it was in buyout negotiations. Caesars World rose 3/4 to 46 5/8, Mirage Resorts added 3/8 to 20 1/2 and Casino Magic gained 5/8 to 8 5/8.
* Echo Bay Mines gained 3/8 to 13 1/4 as gold stocks rose with the precious metal amid concern about inflation prompted in part by the August employment report. Many investors buy gold as a hedge against cost-of-living increases. Sunshine Mining rose 1/8 to 2 1/8 and American Barrick added 3/8 to 23 1/2.
In London, the Financial Times 100-share average was hit by renewed weakness in British bonds and closed down 36.1 points, or 1.11%, at 3,205.4. Frankfurt’s DAX average ended down 8.62 points at 2,165.90, while Tokyo’s 225-share Nikkei average fell 15.20 points to 20,393.98.
Mexican shares closed sharply higher after reversing earlier losses in a technical rebound late in the session, analysts said. The Bolsa index gained 38.04 points to close at a session high of 2,704.07, after earlier falling as low as 2,642.72.
In Sao Paulo, Brazil, the Bovespa index rebounded 3.8% after plunging 10.5% on Monday, after the country’s finance minister resigned.
In commodities trading, the prospect of rising global demand helped crude oil futures rebound from steep declines tied to the end Monday of a 2-month-old strike by Nigeria’s oil workers.
In New York, October crude fell as low as $17.11 a barrel before rebounding to $17.62 a barrel, up 10 cents.
On other markets, coffee and lumber prices jumped, while cocoa and orange juice futures tumbled. The Commodity Research Bureau’s index of 21 commodities rose 0.76 point to 233.22, the highest level since Aug. 1.
