FINANCIAL MARKETS : Despite Dollar Worries, Stocks Manage a Mix
Selective buying helped the stock market finish mixed Monday despite anxiety over the falling dollar. Bond yields were pushed higher by the weakened dollar, although they stabilized, retreating slightly later in the day.
After falling for most of the day, the Dow Jones industrial average gradually dug out of that hole in the afternoon, ending up 7.95 points at 3,997.56. Declining stocks retained an edge over gainers, outnumbering them by about 2 to 1 in the closing New York Stock Exchange tally.
Market indicators composed of wider ranges of stocks behaved similarly. The Standard & Poor’s 500-stock index managed to climb to positive ground by the finish, creeping ahead 0.21 point to 485.63. The New York Stock Exchange composite index finished down 0.18 point at 263.11, and the Nasdaq Stock Market composite ended down 1.02 points at 797.77. The American Stock Exchange market value index fell 1.42 point to 452.07.
Big Board volume totaled 299.83 million shares, down from 330.84 million on Friday.
Stocks tracked the bond market throughout the session, and the afternoon improvement in equities coincided with a modest recovery in bonds. Stocks gained some support when bonds bounced off the bottom.
The yield on the Treasury’s main 30-year bond finished the day at 7.59%, up from 7.53%. Its price, which was off more than a full point during the morning, finished down 21/32 point, or $6.56 per $1,000 invested. Bond prices and yields move in opposite directions.
Another setback for the dollar kept investors cautious.
The dollar fell against key currencies, hitting all-time lows against the Japanese yen and German mark in interday dealings as the mark gained strength in Europe and investors worried about U.S. inflation.
The U.S. currency’s plunge came after another currency realignment by the European Union involving the Spanish peseta and the Portuguese escudo.
In New York, the dollar closed at 92.80 Japanese yen, down from 94.05 on Friday. It also changed hands at 1.405 German marks, down from 1.425.
Mexico’s new peso plunged 88 centavos to 6.85 to the dollar, its lowest rate since the government pared three zeros from the peso’s dollar value at the start of 1993.
Market analysts said investors were trying to decide at what point the positive consequences of the dollar’s decline against other key currencies would be offset by negative ones.
Ricky Harrington, senior vice president and technical analyst at Interstate/Johnson Lane, said stocks of companies with significant overseas exposure stand to benefit if the dollar’s slide boosts their exports.
But Wall Street is concerned that persistent weakness in the dollar will prompt the Federal Reserve Board to raise interest rates in an effort to support it. The intended outcome of such a strategy would be to create demand for dollars by enhancing returns on dollar-denominated assets. Attempts to shore up the dollar through intervention in the currency markets have met with minimal success, leading some observers to speculate that interest rate policy would be the next option.
Much of the selective buying that surfaced in the afternoon was concentrated in consumer non-cyclical stocks, including food and drug issues, and in technology shares.
Among Monday’s highlights:
* Technology stocks extended their recent gains as investors bet that the group’s earnings momentum would remain strong through at least the next two quarters, traders said. IBM closed above the $80 level for the first time since 1992, gaining 3/8 to 80 1/4. Advanced Micro Devices gained 2 3/4 to 34 1/4, Micron Technology rose 1 3/8 to 69 3/8 and Texas Instruments rose 2 to 88 1/2.
* Investors continued to put money into stocks they saw as able to produce solid earnings in an economic slowdown, analysts said, including drug giant Merck, which rose 7/8 to 42 1/2, and Philip Morris, up 1 1/4 to 63 1/4.
* Harley-Davidson fell 2 3/4 to 34 1/4 after the company said late Friday that its Holiday Rambler unit plans to lay off 80 production employees because of a slowdown in sales of recreational vehicles.
* Smith Barney cut its 1995 earnings forecast for the Big Three auto makers. General Motors fell 3/4 to 39 1/8, Chrysler dropped 7/8 to 39 7/8 and Ford slipped 1/8 to 25 1/2.
* Walt Disney rose 2 1/4 to 56 after the company said sales of “The Lion King” videotape topped 20 million copies, generating nearly $350 million in total revenue, in the animated film’s first week at video stores.
Most stock exchanges overseas were flat or fell.
The dollar’s slide knocked down shares in London, sending the benchmark FTSE-100 index down 23.2 points to 3,001.9. In Frankfurt, the DAX 30-share average closed down 39.17 points at 2,070.32, and Tokyo’s 225-share Nikkei average rose 1.10 points to 17,040.72.
Mexico’s Bolsa index rose 3.2 points to 1,522.72 despite the plunging peso.
* BATTERED BUCK
Dollar falls again, raising new doubts about U.S. economy. A1
