Mexican stocks plunged Wednesday after the secretary general of Mexico's ruling party, Jose Francisco Ruiz Massieu, was shot and killed.
The shooting--coming after the March assassination of the ruling party's initial presidential candidate and a rebel uprising in the southern state of Chiapas in January--rattled investors hoping that last month's elections would put an end to the unrest.
The Bolsa stock market index dropped as much as 3.1% before recovering. The index closed down 53.61 points, or 1.9%, at 2,764.82, its lowest level in two weeks. In the United States, American depositary receipts of Telefonos de Mexico were the second-most active issue, falling 1 1/8 to 63 1/4. The Mexican peso also fell, weakening to 3.398 pesos to the dollar in late trading, from 3.387 yesterday.
However, U.S. stocks rallied Wednesday amid continued relief that the Federal Reserve Board did not raise interest rates.
Stocks were also boosted by so-called window dressing prior to the end of the third quarter. At the end of fiscal quarters, fund managers often buy stocks that have been strong performers to improve the looks of their portfolios.
The Dow Jones industrial average rose 15.14 points to 3,878.18, posting its third consecutive increase. Unlike the market rallies posted Monday and Tuesday, which were led by blue-chip issues, Wednesday's increases were broad-based.
Last week, the Dow fell more than 100 points on expectations that the Fed would raise rates for the sixth time this year at its Federal Open Market Committee meeting Tuesday, but the panel took no action.
While many economists expect an increase, they said it now appears unlikely before the November elections unless a sharp drop in unemployment is announced Oct. 7 or the Fed sees other fresh signs of inflation.
The Treasury market dismissed a potentially inflationary report on durable goods, thanks mostly to a strong dollar and a successful auction of five-year notes.
The 30-year bond yield fell to 7.81%. The Commerce Department said orders to U.S. factories for big-ticket durable goods soared 6% in August--the biggest rise in nearly two years--after a sharp drop the previous month.
The dollar rose after Treasury Secretary Lloyd Bentsen and Trade Representative Mickey Kantor said the United States won't impose broad-based trade sanctions against Japan even if talks this week don't achieve all the desired goals for opening Japanese markets. In New York, the dollar rose to 98.85 from 98.12 on Wednesday.
Among Wednesday's market highlights:
* Among the Dow 30 components, Caterpillar rose 1 5/8 to 54 5/8, AlliedSignal advanced 1 1/8 to 35 1/4 and DuPont climbed 7/8 to 58 5/8.
* Cincinnati Milacron rose 2 1/2 to 26 after Merrill Lynch upgraded the stock and raised its estimates of 1994 earnings, saying the company's restructuring efforts should improve margins.
* Antec, a maker of equipment for the cable television industry, sank 5 3/4 to 26 1/4 on the Nasdaq after it said its third-quarter results will be below expectations.
* Aside from the Mexican market, overseas stock markets were higher. London equities finished sharply higher. The FTSE-100 index, which rose 8.7 points Tuesday, closed 30.2 points higher at 3,038.7. The Frankfurt DAX index closed up 9.38 points at 2,068.11. After post-bourse trading, it stood at 2,070.36, up 13.47. Tokyo stocks ended slightly firmer after a quiet session. Buying by public pension and insurance funds coupled with a technical rebound after Tuesday's steep declines pushed up prices. The 225-share Nikkei average finished up 38.71 points, or 0.20%, at 19,507.60.