FINANCIAL MARKETS : Dollar’s Tumble Takes Dow With It
A sharply lower dollar and renewed jitters about inflation pushed U.S. stock prices modestly lower Thursday.
The Dow Jones industrial average, led lower by economically sensitive stocks, fell 14.87 points to 3,979.93, closing below 4,000 for the second time this week as investors sold issues they believe are vulnerable to either a slower economy or higher interest rates.
Declining issues led advancers by about 6 to 5 on the New York Stock Exchange in active trading.
Broader indexes also were mostly lower. The Standard & Poor’s 500-stock index eased 0.52 point to 485.13, though the Nasdaq composite index added 1.81 points to 793.68.
The dollar slid to a post-World War II low against the Japanese yen and to its lowest rate against the German mark since October, 1992. In New York trading, the dollar closed at 95.26 yen, down from 96.78 late Wednesday.
The U.S. currency’s surprise rout helped unnerve the bond market, sending yields higher. But the rise was limited. The yield on the 30-year Treasury bond rose to 7.48% from 7.44% on Wednesday.
The dollar’s retreat so far this year has pulled some global investment money out of the United States and dollar-denominated securities, including stocks, and into European securities, said Leon Brand, global investment strategist at NatWest Securities.
At the same time, however, U.S. markets have benefited as American investors have brought money home from tumbling Third World stock markets, such as Mexico’s.
On Thursday, bonds and stocks were also weakened by economic reports that stirred inflation fears.
The Commerce Department reported that Americans’ personal income rose 0.9% in January and that spending increased 0.4%. It also reported that sales of new single-family houses rose 3.8% in January, slightly more than had been expected.
Those reports could indicate that the economy still has some steam left, which could lead to higher inflation and higher interest rates, traders noted.
At the same time, however, some investors appear to remain convinced that growth is slowing, because the stocks targeted for selling Thursday included many whose fortunes depend on a strong economy.
Among the market highlights:
* The Dow average components were led lower by cyclical issues, including International Paper, down 2 1/8 to 73 1/8; Caterpillar, off 1 1/2 to 48 3/4, and General Electric, which slid 1 to 53 1/8.
Also, Deere & Co. dropped 1 to 73 3/8, and Whirlpool fell 1/4 to 54 1/4.
* Big Three auto stocks, also considered cyclical issues, were weak for a second day. General Motors, a Dow component, lost 5/8 to 39 7/8. Ford fell 1/4 to 25 3/8. Chrysler ended up 1/8 at 41 1/2 after spending most of the session lower.
* Salomon Bros. said it raised its 1995 and 1996 earnings estimate for IBM, setting a 12- to 18-month price target on the stock of $100. IBM finished up 1 7/8 to 77 1/4.
* Homedco Group and Abbey Healthcare said they were merging to form the largest home health care provider in the United States. Abbey soared 7 3/8 to 35 1/4, and Homedco gained 8 3/4 to 52 1/4.
* Some retail stocks moved higher after the release of mixed but generally sluggish February sales figures. Wal-Mart Stores rose 1/2 to 24 7/8, the Limited rose 1 1/4 to 18 3/4 and Sears rose 5/8 to 50 5/8.
* Chiron fell 2 13/16 to 56 after the biotechnology firm said it expects a first-quarter charge of $200 million to $250 million resulting from some corporate purchases.
Overseas stock markets were mixed. Tokyo’s 225-issue Nikkei average rose 344.47 points, closing at 16,963.18. However, Frankfurt’s DAX index fell 7.49 points to 2,118.66 and London’s FTSE-100 index finished at 3,038.2, off 3 points. Mexico’s Bolsa index closed just 0.88 point lower at 1,517.08.
