FINANCIAL MARKETS : Mexico Stocks Bounce Back; Dow Loses 4.7 on Profit Taking
Profit taking amid concerns that Mexico’s financial woes would spread to U.S. companies left stocks mostly lower Wednesday in a volatile session.
After being down more than 25 points early in the the session, the Dow Jones average finished off 4.71 points at 3.862.03, bolstered by a big recovery in the battered Mexican market.
The blue-chip average opened higher after the Labor Department said consumer prices rose a reasonable 0.2% in December and 2.7% for all of 1994, following a similar wholesale price increase announced Tuesday.
Most analysts, however, do not believe this week’s inflation data will dissuade the Federal Reserve from further tightening interest rates at its policy making meeting late this month.
The Mexican Bolsa, which slumped more than 100 points in early trading, finished the day up 55.54 points at 2,027.87 points, after President Clinton said the U.S. would extend credit to bolster the flagging Mexican currency. Clinton’s comments also bolstered the peso, which closed at 5.65 to the dollar compared to 5.75 Tuesday.
Bond yields fell on the consumer price news, with the Treasury’s bellwether long bond closing 7.83%, down from Tuesday’s 7.86%. Its price, which rises when yields fall rose 3/8 point, or $3.75 per $1,000 in face value.
On Wall Street, declining issues outnumbered advancers by 1,182 to 1,052 on the New York Stock Exchange, with Big Board volume totaling 346.31 million shares, down from 351.28 million Tuesday.
Broad market indexes finished marginally mixed.
Among the Wednesday’s highlights:
U.S. banking issues regained some ground after falling sharply, as investors worried that the banks could suffer steep losses in Latin America. Large banking-company stocks still logged substantial losses for the day, with Citicorp down 1 1/4 at 40 1/2, J.P. Morgan off 1 3/8 at 56 3/8, and Bankers Trust down 1 at 56 1/2.
* Despite concern about the Mexican crisis, the American shares of Mexican stocks rallied as the Mexican market recovered. Telefonos de Mexico’s closed up 2 1/4 at 35 5/8, after falling as much as 1 3/8 earlier in the session. Grupo Televisa gained 3 1/4 to 25.
* Other Latin American stocks also recovered. Compania de Telefonos de Chile jumped 4 1/8 to 74 3/4, and Telefonica de Argentina climbed 3 to 49 7/8.
* Federal-Mogul Corp. sank 5 3/8 to 17 1/2 after the company said late Tuesday its 1994 earnings will fall below analysts’ estimates.
* Biotechnology company Biogen Inc. tumbled 6 7/8 to 35 3/8 on news that Schering AG won a patent to manufacture a competing beta-interferon drug to combat multiple sclerosis.
* Lands’ End Inc. jumped 1 7/8 to 15 after reporting its gross margins rose during the crucial holiday selling period.
* Apple Computer was the volume leader in Nasdaq trading and rose 3 1/16 to 46 3/4 amid resurgent rumors that the company would be acquired.
* Gold stocks moved higher on a run-up in gold prices. Homestake Mining rose 1 1/2 to 17 1/4. American Barrick advanced 1 1/4 to 22 1/4. Santa Fe Pacific Gold climbed 7/8 to 12 1/4. Gold rose $2.20 to $377.30 an on the New York Merc.
Elsewhere overseas, stock markets were mixed. Hong Kong’s Hang Seng index plunged 148.97 points to close at 7,392.75, while Tokyo’s 225-share Nikkei average ended up 47.02 points at 19,548.47. In Europe, the DAX average closed at 2,061.05, up 9.95 points, and London’s Financial Times 100-share average lost 11.0 points to finish at 3,049.4.