FINANCIAL MARKETS : Oil Prices Surge as Iran Moves Troops; Dow Rises
Crude oil prices soared to a seven-month high Wednesday, to just under $19 a barrel, on concern about Iran’s stepped-up troop movements in the Persian Gulf and falling U.S. gasoline production.
Meanwhile, the dollar was mildly rattled by news of a surge in the U.S. trade deficit, while stocks and bonds closed mixed. The Dow industrials added 10.38 points to 4,082.99.
In commodities trading, crude oil futures for May delivery surged 55 cents to $18.96 a barrel on the New York Mercantile Exchange, highest since last Aug. 10.
Oil prices shot up after U.S. Defense Secretary William Perry, speaking in Bahrain, said Iran has placed 6,000 troops, along with anti-aircraft missiles and chemical weapons, near the strategic Strait of Hormuz at the entrance to the Persian Gulf.
Perry said the deployment is “beyond any reasonable defensive requirement” and is “a threat to shipping in the area.”
Because so much of the world’s oil passes through the Persian Gulf, “people are getting concerned about Iranian troops and chemical weapons there,” said Hugo Zagaria, foreign trading manager at Cargill Petroleum in Beverly, Mass.
Oil prices also were pushed upward by news of a surprising decline in U.S. gasoline inventories. A drop in U.S. gasoline production below 7 million barrels day, the American Petroleum Institute said, has caused gasoline inventories to slide more than expected recently, leaving them 2% below year-ago levels.
In addition, a report that a power failure forced the Amuay refinery in Venezuela, one of the world’s largest, to shut down also troubled energy-futures traders.
Elsewhere, Wall Street contended with a record trade deficit report for January, which put renewed downward pressure on the dollar early in the day. Later, however, dollar selling eased, traders said.
The buck closed at 88.95 Japanese yen in New York, down from 89.21 Tuesday. It also fell to 1.403 German marks from 1.412.
Early today in Tokyo the dollar was trading at 88.50 yen.
The U.S. bond market, which had sold off modestly Tuesday on news of stronger-than-expected retail sales in recent weeks, was mixed on Wednesday.
Yields were slightly higher on intermediate-term bonds but eased to 7.45% from 7.46% Tuesday on the Treasury’s 30-year bond.
In the stock market, the Dow average was boosted by gains in oil stocks, while broader market indexes were mixed. The Standard & Poor’s 500 added 0.60 point to 495.67 but the Russell 2,000 index of smaller stocks fell 0.36 point to 256.79.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, on volume of 313 million shares.
Some traders are growing jittery, worried that renewed signs of economic strength and a further decline in the dollar could force the Federal Reserve Board to raise short-term interest rates again when it meets on March 28.
For now, however, the vast majority of Wall Street economists believe the Fed will hold rates steady at the March meeting.
Among Wednesday’s highlights:
* Energy stocks rising with crude prices included Arco, up 1 1/2 to 113 7/8; Exxon, up 1 1/8 to 65 5/8; Mobil, up 1 to 88 7/8, and Royal Dutch, up 3/4 to 117 1/8.
* Some metal stocks also advanced sharply on news that inventories of aluminum, copper and other metals are falling more rapidly than expected. Copper prices jumped to a seven-week high, with May futures rising 3.9 cents to $1.38 a pound on the Comex.
Among metal producers, Alcoa leaped 2 1/8 to 40, Phelps Dodge gained 1 3/4 to 53 3/4 and Inco surged 1 3/8 to 27 1/8.
* Several drug issues rose after brokerage Smith Barney recommended the stocks. Winners included Eli Lilly, up 1 1/4 to 70 1/2; Pfizer, up 1 to 87 1/2, and American Home Products, up 1 1/8 to 74 1/2.
But Merck eased 3/8 to 44 1/4 and Bristol-Myers was off 7/8 to 64 1/8.
* In the red-hot technology sector, semiconductor stocks rose further. Intel gained 1 1/8 to a record 84 3/8, Texas Instruments rose 3/4 to 88 3/8, Motorola was up 1 to 54 3/8 and Cypress Semiconductor jumped 1 3/8 to 29 3/8.
Also, Apple Computer surged 1 13/16 to 38 1/16 after Microsoft Chairman Bill Gates said his company will continue making products for the Macintosh computer. Microsoft added 1/2 to 70 15/16.
But sellers clipped Oracle, off 1 1/4 to 33; Parametric Technology, down 1 1/4 to 39 3/4, and Ortel, off 2 1/4 to 16 1/2.
* Fingerhut plunged 3 1/8 to 11 1/8. The direct merchandiser said its first quarter earnings would be below analysts’ estimates.
Stocks ended lower again in Tokyo, with the Nikkei 225-share average closing below 16,000 for the first time since Nov. 17, 1992. It fell 225.11 points to 15,904.85, depressed by the yen’s continuing strength and fallout from this week’s apparent nerve-gas terrorist attack on Tokyo’s subway.
In Frankfurt, the DAX 30-share average edged down 0.29 point to 1,982.66, while London’s FTSE-100 index added 4.7 points to 3,139.7.
Mexico City’s Bolsa index gained 9.92 points to 1,591.16.
