FINANCIAL MARKETS : Dow Exits Roller Coaster Unfazed--Bonds Shaken
Treasury yields resumed their weeklong rise and stocks bounced back to nearly unchanged from a late-session dive Friday as comments by two Federal Reserve Board officials further diminished hopes for an interest rate cut.
The Dow Jones industrial average ended exactly where it began, at 4,641.55, after a wild session that wrenched the blue-chip index down nearly 30 points as late as 2:30 p.m. A late burst of buying at the expiration of stock and index options helped bring the market back up.
New York Stock Exchange volume was heavy at 425 million shares. That was significantly above the 381 million logged Thursday and pushed the Big Board’s weekly volume to just above 2 billion shares, nearly equaling the record of 2.3 billion set during the week of the October, 1987, stock crash.
Stock traders took their signals partly from the bond market, where the benchmark 30-year issue yield jumped to 6.96% from 6.86%. Bond prices and yields move in opposite directions.
The bond market was reacting to comments from Fed Vice Chairman Alan Blinder that a recession is unlikely. Blinder has been one of the first Fed policy-makers to argue for easing to stimulate the economy. He echoed earlier comments Friday by Chicago Fed President Michael Moskow. Traders took both officials’ comments to mean that the central bank is not likely to ease rates further, after nudging them down a quarter of a point earlier this month.
Allen Sinai, chief economist at Lehman Bros. Global Economic Advisors, said the stock market looked fragile as it closed out a turbulent week.
“But the bond yield is at the high end of the trading range and the equity market is moving towards the lower end of its fair value range. It may present a buying opportunity,” he said.
Thom Brown, managing director at Rutherford, Brown & Catherwood, said stocks took a breather Friday, with investors assessing their positions after this week’s selloff.
“After two days like Tuesday and Wednesday, the market needed to do a bit of calming down and digesting,” he said.
Broad market indexes finished firmer. The NYSE’s composite index rose 0.31 point to 296.67. The Standard & Poor’s 500-stock index rose 0.08 point to 553.62.
The Nasdaq composite index rose 1.02 point to 961.59, while the American Stock Exchange’s market value index added 3.69 points to 514.55. The dollar rose slightly.
Among the market highlights:
* Technology stocks were mixed. Apple Computer fell 3 5/16 to 43 3/4 after announcing disappointing third-quarter results Thursday. Microsoft fell 4 1/8 to 92 after the Justice Department canceled a civil subpoena in which it had asked the company for information regarding its on-line service, but said it may continue its investigation.
Motorola gained 2 7/8 to 76.
* Financial and bank stocks, which are sensitive to changes in interest rates, dropped as rates rose. Citicorp lost 1 1/4 to 60 1/4.
* Major foreign stock markets finished higher, ignoring Wednesday’s rout on Wall Street. The 30-share Frankfurt DAX index ended 17.53 points higher at 2,201.86, a rise of 16.96 from last week. In London, The FTSE-100 closed up 12.7 points at 3,413.1. Tokyo’s 225-share Nikkei average gained 135.67 points, or 0.82%, to 16,589.09, up 71.39 from seven days ago.
* USAir rose sharply on heavy volume. The airline said its second-quarter net income came to $1.47 per share, contrasted with a 9-cent loss a year ago.
