FINANCIAL MARKETS : U.S.-Japan Pact Gives Stocks, Bonds and Dollar a Lift
Stocks bounced higher and bond yields fell Wednesday, and the dollar hit a two-month high against the Japanese yen, after the United States and Japan settled their car trade dispute, narrowly avoiding an all-out trade war.
The Dow Jones industrial average rose 14.18 points to 4,556.79 after logging three straight days of losses.
Some analysts were disappointed that stocks did not get more of a lift from the trade accord. Ricky Harrington, senior vice president and a technical analyst at Interstate-Johnson Lane in Charlotte, N.C., noted that U.S. auto stocks, which might have been expected to rise, finished unchanged--Chrysler at 47 3/4, General Motors at 47 7/8, and Ford at 30 1/4.
Volume was moderately heavy, with 368.05 million shares changing hands on the New York Stock Exchange, up from 346.96 million on Tuesday. Advancing issues had a slim 5-4 lead on decliners on the Big Board.
The accord, which canceled $5.9 billion worth of U.S. tariffs on luxury Japanese autos, eased concern that the two nations would institute further sanctions and disrupt trade.
Under the trade agreement, Japanese automobile manufacturers agreed to voluntarily increase purchases of American cars and auto parts. In exchange, the United States dropped demands for specific sales targets, settling for voluntary commitments for increased orders from individual Japanese car makers.
Analysts said the market’s rise was undermined by rumors of a delay in the introduction of Microsoft’s highly touted Windows 95 operating system. Microsoft denied the rumors, saying the program is on track for an Aug. 24 launch. Microsoft ended 13/16 higher at 87 11/16. Other computer stocks rose, and IBM gained 3/4 to close at 96 1/8.
Broad market indexes, including the NYSE composite index, the Standard & Poor’s 500-stock index and the Nasdaq composite index, closed moderately higher.
Bond yields retreated in light trading as the auto agreement’s energizing effect on the dollar rippled into securities and a sale of new five-year notes turned out better than expected.
The Treasury’s main 30-year bond yield fell to 6.51% from 6.54% on Tuesday. Its price, which moves in the opposite direction, finished up 17/32 point, or $5.31 per $1,000.
Yields on five-year Treasury notes fell in auction to the lowest level in 16 months. The high yield was 5.91%, down from 6.25% at the last auction May 24. The notes will carry a coupon interest rate of 5.675%, with each $10,000 in face value selling for $9,987.20. A total of $11.5 billion in notes were sold, out of bids totaling $32.5 billion.
The trade agreement sent the dollar rocketing higher. It closed in New York at 85.68 yen, up 1.8% from 84.18 on Tuesday. The dollar also fetched 1.397 German marks, up from 1.386 on Tuesday.
Among Wednesday’s highlights:
* Oil stocks rose following a bullish production report by the American Petroleum Institute. Chevron finished up 1 1/8 at 48 3/8, and Exxon rose 1 1/2 to 72 1/8.
* Health care stocks fell after Smith Barney downgraded a number of them. Coram Healthcare fell 2 to 13 1/2, Healthsource fell 3 3/4 to 33 1/8, Health Systems International fell 1/8 to 28 1/4, Mid Atlantic Medical Services fell 7/8 to 18 3/8, and Sierra Health Services fell 5/8 to 23 3/8.
* Maxicare Health Plans fell 3/16 to 14 3/4, Oxford Health Plans tumbled 1 5/8 to 46 1/2, PacifiCare Health Systems was unchanged at 48 1/2, U.S. Healthcare dropped 1 3/16 to 30 11/16, Wellcare Management fell 1 to 21 1/4, and Coventry fell 1/2 to 13 5/8.
* But drug stocks gained as investors continued to bet that these issues can perform well even in a recession. Merck rose 1 to 49 5/8, while Upjohn gained 1 1/8 to 37 7/8.
Overseas, Mexico’s Bolsa index rose 60.98 points, or 2.89%, to 2,173.68, its highest level since Jan. 17.
Frankfurt’s 30-share DAX average shed 25.96 points to close at 2,096.44, and London’s FTSE-100 average fell 30.5 points to 3,282.7. In Tokyo, the Nikkei 225-share average closed down 140.98 points at 14,618.07.
