FINANCIAL MARKETS : Dow Up 4 as Investors Look Beyond Dollar
Treasury yields dropped Thursday as investors appeared to shift their attention away from the troubled dollar and focus instead on the economy’s fundamentals ahead of a key employment report. Stocks rose modestly.
The dollar, which has plunged to all-time lows this week, perked up a bit in early trading after Treasury Secretary Robert E. Rubin said the government will intervene to support the dollar “when it makes sense.” But the dollar quickly retreated against the German mark and Japanese yen amid ongoing concerns about Latin America. At the end of trading Thursday, the dollar was valued at 90.50 yen, down from 91.33 the day before, and at 1.3945 marks, up slightly from 1.3935 on Wednesday.
German stocks ended sharply lower and traders said that market was skeptical about the dollar’s stabilization, worried that the currency crisis may weigh further on German companies with heavy exports. Frankfurt’s 30-share DAX index ended down 23.57 points at 2,001.64. In Tokyo, stocks rose slightly.
The U.S. Treasury’s main 30-year bond yield fell to 7.51% from 7.54% on Wednesday.
The American stock and bond markets “had a decent day today even though the dollar did not,” said Nancy Vanden Houten, a money market economist at Merrill Lynch & Co. “Maybe we are seeing sort of a separation in the two, at least for a little while.”
In the absence of data on the economy, the bond market has been swayed for nearly two weeks by the decline of the dollar.
But analysts said traders apparently based their actions Thursday on the economy, which recently has shown some signs of slowing. A strong economy fuels inflation, which erodes the value of fixed-income investments such as bonds.
The Labor Department said Thursday that new unemployment claims rose by 4,000 last week. But investors were more focused on February payroll and unemployment data due out today. Analysts also said some traders positioned their holdings Thursday in advance of today’s report. Economists are expecting a rise of between 225,000 and 250,000 jobs, which would represent a slowdown.
The bond market pays close attention to the employment report, the first major snapshot of economic performance during February, which could shape views on the direction of interest rates.
On the New York Stock Exchange, the Dow Jones industrial average ended 4.16 points higher at 3,983.39, after trading in a narrow 22-point range all day. Of the 30 Dow index components, 11 rose, 17 fell and two were unchanged.
Broader stock indexes posted moderate gains. The NYSE’s composite index rose 0.01 to 261.61. The Standard & Poor’s 500-stock index added 0.02 to 483.16.
“Most people are crossing their fingers, hoping to see some stabilization in South America and Mexico,” said John Burnett, a trader at Donaldson, Lufkin & Jenrette Securities.
Still, many traders and analysts were impressed with the market’s strength in the face of the dollar’s weakness. “Who can feel too terrible about this market, which is still within striking distance of its all-time high?” Burnett said.
Among market highlights:
* Bank stocks fell on rumors that J.P. Morgan had suffered big foreign exchange trading losses in Latin America. Morgan said it saw no reason to release its quarterly results early. Its stock finished down 1 1/8 at 62 3/4. But shares of Citicorp, which also has a large presence in Latin America, were up 3/4 at 40 3/4.
* Semiconductor stocks rose, then fell back, then rallied again after the Semiconductor Industry Assn. said its book-to-bill ratio rose last month. Intel added 7/16 to 80 3/16 in Nasdaq trading. IBM rose 7/8 to 80 5/8.
But National Semiconductor fell 3/8 to 17 after the chip maker said its third-quarter net earnings were 43 cents a share, down from 48 cents a year ago.
* Dayton Hudson fell 1 7/8 to 67 3/4 after the company posted lower-than-expected earnings for the latest quarter. Exide lost 7/8 to 46 3/8 after telling analysts that warm winter weather had resulted in a drop in its battery sales.
* Medicus Systems, maker of software for the health care industry, fell 4 15/16 to 12 13/16 after saying it did not expect its third-quarter earnings to meet analysts’ targets.
* Gasoline prices dropped to a two-month low amid rising production and persistent concern that an additive used to reduce pollution can cause illness. The decline pushed crude oil prices below $18 a barrel for the first time since Jan. 28.
Production of reformulated gasoline, the grade required for delivery against New York Mercantile Exchange futures contracts, rose to 1.92 million barrels a day last week, the highest rate in nine weeks, according to the American Petroleum Institute.
Several states, including Wisconsin and New Jersey, have expressed concern that an additive in the fuel, methyl tertiary butyl ether, can cause headaches, dizziness and nausea.
