FINANCIAL MARKETS : Stocks Post Modest Gains; Bonds Rally
Stocks rallied late in the session Wednesday, buoyed by a strong dollar, falling bond yields and a selloff in gold.
The Dow Jones industrials gained 19.17 points to 3,857.65, with most of the rise occurring in the final 30 minutes.
The broad market also advanced, as rising issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange in heavy trading of 319 million shares.
The Nasdaq market of mostly smaller stocks, which was slammed by profit taking Tuesday, also recovered. The Nasdaq composite index added 2.26 points to 745.84 after diving 8.38 points the previous day.
Traders said a decline in bond yields helped sentiment in the stock market. Yields fell across the board, though bond traders said the market appeared to be moving mostly for technical reasons.
The 30-year Treasury bond yield slid to 7.85% from 7.91% on Tuesday, for the first decline in five sessions.
The two-year T-note yield dropped to 7.62% from 7.72% on Tuesday.
The strengthening dollar lent support to U.S. markets, analysts said. The dollar jumped to 101.35 Japanese yen in New York, a 21-week high and up from 100.68 on Tuesday.
The dollar also rose to 1.559 German marks, up from 1.556.
The dollar has been gaining in part on expectations that the Federal Reserve Board will continue to raise short-term interest rates, an action that should bring more foreign money into short-term U.S. money market securities.
Also, the financial crisis in Mexico and ongoing problems in Russia are causing a “flight to quality” in markets, which naturally favors dollar-denominated investments.
What was good for the dollar, however, was bad for gold, which competes with the dollar as a “safe haven” investment.
Gold futures prices skidded to their lowest level in eight months Wednesday as investors turned up the selling pressure.
On New York’s Comex, gold futures for January tumbled $5.60 to $374 an ounce, the lowest since May 5. Silver also came under pressure, with the March futures contract down 12.6 cents to $4.64 an ounce.
Among the market highlights:
* Auto stocks jumped after brokerage Bear Stearns said the stocks were attractive again, after their 1994 declines. Chrysler rose 1 7/8 to 50 7/8, GM advanced 1 1/2 to 43 1/4 and Ford added 3/4 to 28 5/8.
* Some chemical stocks advanced. Union Carbide jumped 1 1/2 to 29 1/2 on news that corporate insiders have been buying the stock. And Dow Chemical surged 2 1/8 to 68 1/2 after Salomon Bros. upgraded the stock to “buy” from “hold.”
* The three major federally chartered financial companies surged, apparently reflecting optimism that the new Republican Congress will be friendlier than expected to the companies’ future. Federal Home Loan Mortgage soared 2 3/4 to 53 1/8, Federal National Mortgage zoomed 2 1/8 to 74 3/4 and Student Loan Marketing jumped 2 1/2 to 35 3/4.
* Among tech issues, Dell Computer leaped 2 3/8 to 42 1/4 after Lehman Bros. raised its 1995 and 1996 earnings estimates.
* Mitek Surgical Products soared 5 1/2 to 29 after Johnson & Johnson said it will buy the firm. Johnson & Johnson added 1/2 to 55.
* Gold stocks fell with bullion’s price. ASA dropped 1 3/4 to 41 7/8, American Barrick gave up 7/8 to 20 1/2 and Hemlo Gold lost 3/8 to 9 3/8.
* U.S.-traded Mexican stocks went on a roller-coaster ride, reflecting wild trading in Mexico City. On the New York Stock Exchange, Telmex sank as low as 36 3/8 before closing at 38 1/8, off 1/2.
Among other U.S.-traded issues, Vitro fell 7/8 to 12 1/8, Coca-Cola Femsa eased 1/4 to 22, Grupo Tribasa lost 7/8 to 14 1/4, the Mexico Fund tumbled 1 1/4 to 20 7/8 and Empresas ICA sank 1 to 12 7/8.
In South America, Brazil’s Bovespa stock index fell 3.1%, Argentina’s Merval index lost 5.1% and Chile’s IPSA index fell 1.5%.
In Europe, London’s FTSE-100 index eased 14.1 points to 3,051.6 and Frankfurt’s 30-share DAX average slipped 2.52 points to 2,072.26.
In Tokyo, the Nikkei-225 index opened 1995 by falling 39.02 points to 19,684.04.
