FINANCIAL MARKETS : Dollar Falls Below 85 Yen; Stocks Gain
The dollar plunged below 85 Japanese yen Thursday in after-hours U.S. trading, the latest in a spree of record lows, as currency traders reacted negatively to prospects for a U.S. tax cut.
But on Wall Street, blue-chip stocks crept up to the week’s second record closing high, despite weakness in oil stocks and jitters before today’s report on March employment.
The Dow industrial average added 4.84 points to 4,205.41, inching past its previous record high of 4,201.61 set Tuesday. It marked the 16th time the blue-chip index has set a closing high since Feb. 15.
In the broader market, advancing issues beat decliners by about 10 to 9 on the New York Stock Exchange in active trading.
In currency trading, the dollar closed at a record low 85.40 yen in New York, down from 86.04 yen on Wednesday.
In after-hours trading--a stretch of about two hours between the time the U.S. market closes and the Japanese market opens--dealers said the dollar fell to 84.80 yen, its first postwar drop below 85.
Traders said the dollar’s continuing slide, ostensibly a reflection of large U.S. budget and trade deficits, was exacerbated Thursday as investors reacted to the House of Representatives’ passage of a $189-billion tax cut bill late Wednesday.
Investors fear that the tax cuts will cause U.S. deficits to balloon further in coming years, even though House Republicans say they will pay for the tax cut with spending cuts.
But while the dollar sank against the yen, it moved higher against the German mark, closing at 1.3762 marks in New York, up from 1.3725 on Wednesday.
In the bond market, yields inched lower despite nervousness ahead of the employment report.
The yield on the Treasury’s benchmark 30-year bond fell to 7.34% from 7.36% on Wednesday.
Investors are hoping that today’s employment report shows continued moderation in economic growth in March, which would be considered a guarantee that the Federal Reserve Board won’t raise short-term interest rates again anytime soon.
“The market would want to see enough evidence so it can conclude that the Fed is finished tightening,” said Kathleen Stephansen, a senior economist at Donaldson, Lufkin & Jenrette Securities Corp.
Additional evidence of a slowing economy arrived Thursday with downbeat sales reports from leading retailers.
On Wall Street, blue-chip stocks’ gains reflected continued belief in the “soft landing” thesis for the economy.
But smaller stocks struggled. The Nasdaq composite index of mostly smaller issues declined 2.52 points to 813.80 because of continued selling of some technology issues.
Among Thursday’s highlights:
* The nation’s biggest retailer, Wal-Mart, lost 5/8 to 25 3/8, Dayton Hudson dropped 2 1/4 to 68 3/4, Sears dipped 5/8 to 52 7/8, Woolworth fell 1/2 to 18 3/4, Circuit City gave up 1 3/4 to 25 1/4 and Ann Taylor slumped 3 7/8 to 32 7/8.
* On the upside, banking stocks moved aggressively higher, with Chase Manhattan soaring 3 5/8 to 41 5/8 after respected investor Michael Price, president of Heine Securities Corp. of Short Hills, N.J., disclosed that he increased his investment to 6.1% of Chase’s outstanding stock.
Other banking stocks also gained. Chemical Bank rose 1 3/4 to 41, Citicorp surged 1 1/8 to 45 1/4, Wells Fargo jumped 2 3/8 to 160 1/2 and BankAmerica added 1 to 50 3/4.
* Technology stocks losing ground included Intel, off 1 1/8 to 85 1/2; Adobe Systems, down 2 1/2 to 48 1/4, and Lotus, down 1 7/8 to 33 3/8.
In one of the day’s biggest casualties, software firm Wall Data plummeted 19 3/4 to 22 after saying it expects a first-quarter loss because of lower-than-expected revenue in North America.
But Apple Computer got a boost from a report that Canon may try to buy it. Canon denied the story and analysts dismissed it, but Apple stock rose 2 to 36 3/4. Apple declined to comment.
* Oil stocks were broadly lower in profit taking. Exxon fell 1 1/4 to 66 3/4, Unocal dropped 3/4 to 28 1/4, Chevron fell 5/8 to 46 1/4 and Texaco was off 7/8 to 65.
* Among new stock issues, telecommunications equipment maker Premisys Communications soared 19 to 35, or more than twice its initial offered price of 16 a share.
Overseas markets were mixed, with Tokyo’s Nikkei 225-share average closing down 66.62 points at 15,815.87. In Frankfurt, the DAX 30-share average gained 9.43 points to 1,979.27; London’s FTSE-100 average rose 10.7 points to 3,200.9.
Mexico’s Bolsa index closed 4.31 points lower at 1,914.78.
