FINANCIAL MARKETS : Dollar Slides; Dow Drifts Down 6 Points
The dollar tumbled to a two-month low against the German mark and fell below 100 Japanese yen Monday as flight from weaker European currencies into the safe haven of the mark undermined demand for the U.S. currency.
Stocks drifted to a mixed close and bond yields rose in a subdued session held in check by the dollar’s weakness and other economic concerns.
Analysts, unable to find any fundamental reasons for the dollar’s sudden drop, attributed the move to technical selling as dealers who had taken large dollar positions in recent weeks sold the currency to avoid bigger losses.
Early in U.S. trading, the Federal Reserve Bank of New York announced it was buying pesos and selling dollars on behalf of the Banco de Mexico in an effort to support the battered Mexican currency amid its ongoing crisis. The intervention helped stabilize the peso at 5.4 to the dollar, compared to 5.7 on Friday.
While some market participants said the Fed action hurt the U.S. currency, most analysts said the volume of dollars sold was too small to explain the broad-based dip that sent the dollar down as much as 3 German pfennigs at one point.
In New York, the dollar closed at 1.537 marks, down from 1.563 Friday and the lowest level since Nov. 11. The greenback closed at 99.93 yen, down from Friday’s 101.38.
On Wall Street, buying enthusiasm was limited, with one stock--Pet Inc.--getting much of the attention. News that Pet will be acquired by the Pillsbury division of Britain’s Grand Metropolitan for $26 a share, or $2.6 billion, was one of the few noteworthy developments during the session.
The Dow Jones average finished at 3,861.35, off 6.06 points after meandering at modestly higher and lower readings all day. In the broader market, gainers led losers by about 7 to 6 on the New York Stock Exchange, where trading volume came to 279.27 million shares, down from Friday’s 308.08 million.
Expectations of solid corporate profit reports were overshadowed by worries about inflation and whether the Federal Reserve will feel compelled to raise interest rates again to keep price pressures contained.
Companies will begin releasing their fourth-quarter results in a few weeks.
In the bond market, the dollar’s sharp plunge and heightened concern that a fresh batch of economic data this week will signal higher inflation sent yields higher. The Treasury’s key 30-year bond closed at 7.88%, up from Friday’s 7.84%. Its price, which moves in the opposite direction, closed down 1/4 point, or $2.50 per $1,000 in face value.
Among the market highlights:
* Mexican stocks traded in the United States remained in the spotlight. Telefonos de Mexico was the second most heavily traded NYSE stock, falling 3/8 to 36 1/2. Grupo Televisa fell 1 3/4 to 25 1/8 and Empresas ICA lost 1 3/8 to 10 1/2.
* Pet soared 5 3/8 to 25 1/2 after Grand Metropolitan said it will pay $26 a share in cash for the specialty food company.
* Food stocks in general were strong, in sympathy with the Pet deal. Heinz rose 3/4 to 39, and Quaker Oats gained 1 1/8 to 32 1/8.
* Advanced Micro Devices rose 1 to 28 7/8 after it said it has been in talks with Intel to end a dispute over cloning rights to Intel chips. Intel rose 1 to 66.
* Wal-Mart Stores fell 1/8 to 21 7/8 despite the Arkansas Supreme Court overturning a lower-court ruling that the retailing giant had engaged in “predatory pricing” aimed at driving independent drugstores out of business.
* Lotus was up 2 to 42 after an industry magazine, PC Week, published an article speculating that AT&T; might be interested in buying Lotus. AT&T; rose 1/8 to 48 3/8. The companies had no comment concerning the speculation.
* Artisoft gained 1 1/2 to 9 3/4. The company said it is selling almost all of its Eagle Technology assets to Microdyne Corp. for about $17.5 million.
Overseas stocks were mixed. In Tokyo, the 225-share Nikkei average ended down 74.54 points at 19,444.92, while London’s Financial Times 100-share average fell 9.2 points to 3,055.8. Frankfurt’s 30-share DAX average closed at 2,059.18, up 5.26 points.
