FINANCIAL MARKETS : Market Gauges O.C. Crisis; Dow Gains 5.38
Stocks closed on a mixed note Friday, with the Dow Jones industrial average ending with a modest gain as Wall Street momentarily shrugged off its worries about the fiscal crisis in California’s Orange County and fears of another interest rate hike.
Bonds ended little changed while the dollar eased against the Japanese yen and German mark.
The Dow rose 5.38 to 3,691.11, but posted a loss of 54.51 for the week.
Wall Street was still trying to gauge the fallout of Orange County’s bankruptcy filing, Fidelity Investment’s scrapping of the payout for its Magellan Fund and Federal Reserve Chairman Alan Greenspan’s comments hinting at future rate hikes, analysts said.
Those factors “have all combined to make for a pretty choppy environment,” said Jack Shaughnessy, director of research at Advest.
The blue-chip average dropped as much as 28 points in the first hour, briefly recovering its losses before midday. The Dow retreated a second time and spent the afternoon posting modest losses, until computer-guided buy programs pushed it barely into positive territory in the last 30 minutes of trading.
Despite the gain in the Dow, declining issues led advancers by about 13 to 9 on the New York Stock Exchange, where volume was relatively heavy at 336.54 million shares, down from 362.78 million on Thursday.
Broad-market indexes ended mixed. The NYSE’s composite index rose 0.37 point to 244.17. The Standard & Poor’s 500-stock index added 1.51 points to 446.96.
But the Nasdaq composite index declined 0.07 point to 719.05. And the American Stock Exchange’s market value index lost 2.15 points to 420.66.
In the bond market, the Treasury’s 30-year bond yield fell to 7.85% from 7.87% on Thursday. Its price, which moves in the opposite direction, was up 1/8 point, or $1.25 per $1,000 in face value.
Municipal bonds also recovered some of their losses. The Bond Buyer index of 40 actively traded municipal bonds, which finished at 83 28/32 the day after the bankruptcy filing, finished the week at 84 2/32, up 15/32 point from the day before. The average yield to maturity was 7.04%, down from 7.08% Thursday.
The dollar closed in New York at 100.11 Japanese yen, down from 100.49 yen Thursday. It also closed at 1.5771 German marks, up from 1.5767.
Among Friday’s highlights:
* Leading the Dow gainers was International Business Machines Corp., which added 1 1/4 to 71 1/2. Compaq Computer Corp. gained 1 to 40. Morgan Stanley Group Inc., which said Thursday it was in merger talks with S. G. Warburg Group, gained 2 7/8 to 58 1/8.
* Semiconductor stocks rallied after the industry’s book-to-bill ratio rose in November. Motorola Inc. advanced 1 3/4 to 55 3/8, Texas Instruments rose 1 5/8 to 72 and National Semiconductor gained 1 to 18 3/8, although Intel Corp. ended flat at 62 3/4.
* Some health maintenance organization stocks also firmed after a two-session bashing on worries thatpremiums may decline next year. Oxford Health Plans jumped 4 3/4 to 74 1/4 and Humana Inc. gained 5/8 to 19 1/8. But U.S. Healthcare Inc. slipped 1/8 to 39 1/4.
Railroad stocks fell after Morgan Stanley downgraded six railroad companies to “hold” from “buy,” noting they have doubled in price since 1991.
* Burlington Northern fell 1 1/2 to 49, Conrail fell 3/4 to 49 3/4 and CSX Corp. fell 1/2 to 64 3/4. Norfolk Southern dropped 5/8 to 61 1/4 while Santa Fe Pacific eased 1/8 to 16 5/8 and Union Pacific fell 3/8 to 44 5/8.
* Footwear maker Timberland Co. sank 4 3/8 to 22 7/8 after saying sales have not kept pace with its aggressive outlook and it expects 1994 earnings per share to be below last year’s results.
Overseas stock markets followed Wall Street lower. Hong Kong’s Hang Seng index crashed through two support levels to end down 279.24 points at 7,789.07, a new closing low for the year. In Tokyo, the Nikkei 225-share average, reacting to Hong Kong’s plunge, fell 201.74 points to 18,978.30. Mexico City’s Bolsa’s 37-share IPC index was down 32.11 points at 2,467.79 points.
London’s Financial Times 100-share average also reacted to Wall Street’s weakness and closed 36.5 points lower at 2,977.3.
