FINANCIAL MARKETS : Foreign Stock Woes Crimp Dow; Bond Yields Mixed
Stocks ended mostly lower Monday but still significantly above their low points for the session, amid weakness in foreign markets and concern about interest rates.
Precious metals and energy prices fell sharply, though losses in foreign stock markets usually send investors scurrying to the safety of hard assets.
The Dow Jones industrial average closed off 2.02 at 3,867.41, after dropping about 31 points during the day. In the broader market, declining issues outnumbered advancing ones by about 5 to 3 on the New York Stock Exchange. Big Board volume retreated to 325.84 million shares from 378.19 million shares traded Friday.
Foreign shares were sharply lower at the opening bell on Wall Street and pulled U.S. stocks down with them.
In Tokyo, the 225-issue Nikkei index lost 5.6% as damage estimates from last week’s devastating earthquake in Kobe mounted higher. In London, the FTSE 100-share average fell 40.8 points to 2954.2. Frankfurt’s DAX average ended off 28.75 points at 2,026.83. Share prices also ended sharply lower in Paris and Zurich. The concerns that depressed stock markets in Japan and elsewhere provoked new ones about interest rates worldwide.
The big need for capital to rebuild Kobe could push up the cost of borrowing, said James Melcher, founder and president of Balestra Capital.
Stock investors are already skittish about interest rates. The Federal Reserve Board’s policy-setting Open Market Committee is to meet Jan. 31.
Bond yields closed mixed in light activity as investors held their positions ahead of new supplies and the Open Market Committee’s meeting. The Treasury’s 30-year bond yield edged upward to 7.90 from 7.88% at the previous session. Its price, which moves in the opposite direction, fell 7/32 point, or $2.1875 per $1,000 in face value. Yields on shorter-term Treasury securities were unchanged to slightly lower.
Other factors weighed on stocks prices, in particular the fate of the proposed $40-billion U.S. aid package for Mexico. Some members of Congress have expressed opposition to the legislation.
But by midafternoon, encouraging comments from Republican lawmakers and White House officials about the plan’s chance for passage helped turn around stocks, analysts said.
In addition, after four sessions of decline, stock prices were too attractive to ignore, said David Holt, director of technical research at Wedbush Morgan Securities.
“Prices fell far enough and people just couldn’t stay away,” Holt said.
Broader market indexes were mixed. The NYSE’s composite index rose 0.09 point to 253.47, while Standard & Poor’s 500-stock index rose 1.03 points to 465.81.
The Nasdaq composite index lost 2.54 points to 759.51.
At the American Stock Exchange, the market value index fell 0.73 point to 436.91.
Among Monday’s highlights:
* Wellcome rose 4 3/8 to 15 1/8. Rival Glaxo has made an unsolicited bid for the company. Glaxo fell 1 3/8 to 19 1/8.
* Stratus Computer lost 10 7/8 to 28 3/8. The company reported disappointing revenue growth in the fourth quarter.
* IBM’s fourth-quarter earnings beat analysts’ expectations, but its shares fell 1 1/8 to 74 1/4.
* Aldila lost 5 1/8 to 4 7/8. The company forecast 1995 revenues below 1994 levels. Merrill Lynch lowered the stock’s rating.
* Sonic Solutions was off 4 1/4 to 11 1/2 after it said late Friday its third-quarter earnings would be below Wall Street expectations.
* Dr Pepper/Seven-Up jumped 1 1/8 to 30 7/8 after Cadbury Schweppes said it was engaged in talks about merging with the American beverage bottler.
* Citicorp rose 1 1/8 to 40; J.P. Morgan advanced 1 1/8 to 60.
In commodities trading, gold and silver futures prices tumbled in reaction to selling triggered partly by sharp declines in overseas stock prices.
The downturn halted a four-day rally for gold, and the price fell $4 on the New York Merc to $381.40 an ounce. Silver fell 9.7 cents to $4.82 an ounce.
Crude oil futures were weakened by improved supplies of reformulated gasoline and the mild weather over most of the nation so far this winter. Light, sweet crude oil for March delivery contracts fell 32 cents to $18.10 a barrel on the New York Comex.