FINANCIAL MARKETS : Bank Issues Up on Otherwise Downbeat Day
The stock market succumbed to selling Monday that weighed down popular gauges despite an upbeat performance by banking issues.
News of the intended union of Chase Manhattan and Chemical Banking to form the country’s biggest bank intensified speculation about consolidation in the industry and boosted numerous financial issues.
But the banking sector’s buoyancy had a minimal impact marketwide.
The Dow Jones industrial average ended with a deficit of 7.40 points at 4,594.00 after turning lower in afternoon action. Broader market indicators were also weighed down, with the Nasdaq Stock Market suffering the steepest setback, caused by a slump in technology shares. Nasdaq’s composite index skidded 11.82 points to 1,008.15.
The New York Stock Exchange composite dipped 0.16 point to 300.69, and the Standard & Poor’s 500 fell 1.05 points to 559.05. The American Stock Exchange market value index declined 0.79 point to 530.18.
Losers and gainers were separated by fewer than 50 issues on the New York Stock Exchange, where trading activity eased. Big Board volume amounted to 267.87 million shares as of 4 p.m. Eastern time, compared to 255.65 million on Friday.
Market analysts said Wall Street was destined to remain listless this week in the sessions leading up to the long Labor Day weekend. U.S. financial markets will be closed Monday for the holiday.
“It just appeared to be a pre-Labor Day lull,” said Ned Riley, chief investment officer of The Private Bank, a Bank of Boston investment subsidiary. “Clearly, the economy news at the end of the week will dictate the trend, especially in the bond market, which undoubtedly will affect equities.”
The employment report for August, scheduled for release Friday, kept investors from making major commitments to the market. It will be scrutinized for hints about the economy’s health.
Most forecasters don’t expect the report to contain market-moving news, but if the data depicts unexpectedly vigorous economic growth, both the stock and bond markets could be disappointed. Many investors are hoping the Federal Reserve Board will nudge interest rates lower again next month, but signs of an economic revival could deter the central bank’s policy makers.
Bonds were little changed Monday, holding last week’s gains. The yield of the benchmark 30-year Treasury bond held steady at 6.70%. The yield on the two-year note fell a basis point, to 5.84%.
“The market is probably saying we’re done worrying about a pickup in economic growth,” said Fred Leiner, a bond market strategist at Prudential Securities in Chicago. “It won’t be enough to reignite any inflation,” he said.
Even so, “the fact that the economy is picking up a little bit” means bond yields probably won’t fall below 6.5% anytime soon, he said.
Meanwhile, the dollar drifted lower against the mark in languid trading, as the German currency gained further ground from the resignation of France’s finance minister.
“Basically today has been a carry-over from Friday,” said Steve Flanagan, foreign exchange trader at Credit Agricole in New York.
French Prime Minister Alain Juppe shocked the currency market Friday with the announcement that Alain Madelin had resigned. Juppe said the finance minister had been too aggressive in instituting fiscal reforms.
The political uncertainty caused currency dealers to unload their French franc holdings and seek refuge in the more stable German mark, which served to undermine the strength of the dollar.
Although selling Monday was far less aggressive, traders remained concerned about just how fiscally responsible the French government will be and what impact the resignation will have on the dollar.
“The mark has been gaining quite a bit in the last 24 hours. That is definitely weakening the dollar,” said Steven Jury, chief dealer at UBS. “There is a good chance it could continue to be pressured.”
By late in the New York session, the dollar had eased to 1.4651 German marks, from 1.4707 marks on Friday. The dollar also dipped to 96.69 Japanese yen from 96.70 late Friday.
In stock trading, merger news provided a focus for investors, although the impact was confined to banking issues.
Among Monday’s highlights:
* Chase Manhattan topped the Big Board’s list of active issues, spurting 6 5/8 to 59 5/8 in reaction to news that Chase is merging with Chemical Banking in a $10-billion stock swap deal. Chemical rose 5 3/4 to 60 1/8 and was the second most heavily traded NYSE stock.
Several other banks were among the heavily traded issues. Citicorp, which will be displaced as the nation’s biggest bank should the Chase-Chemical union be consummated, was up 7/8 to 66 1/2. PNC Bank rose 1/2 to 26, Bank of New York rose 2 5/8 to 43 3/4 and Bankers Trust rose 2 1/4 to 69 7/8.
* Technology stocks were laggards, and the Big Board’s actives list numbered several losers. International Business Machines fell 2 1/4 to 101 5/8, Motorola fell 1 7/8 to 70 7/8 and Texas Instruments fell 3 5/8 to 70 7/8.
Prominent among Nasdaq’s decliners were volume leader Intel, down 1 3/4 to 58 5/8, and Microsoft, down 4 5/16 to 90 1/16.
Overseas, Tokyo stocks ended higher, boosted by a late futures rally. The Nikkei index of 225 selected issues rose 76.61 points, or 0.43%, to 17,847.29 after a 151.31-point fall Friday.
London’s market was closed for a holiday.
In Mexico, the Bolsa index ended at session highs, up 30.60 points at 2,493.51.
In commodities trading, soybean and cotton prices surged as a heat wave continued to bake crops in the Midwest and Southeast and insect infestations threatened cotton fields in the Southwest.
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Bank Shares Surge -- Again
Stocks of major banking firms jumped on Monday after the Chase-Chemical deal was announced, adding to the already large gains many of the shares have racked up this year.
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1995 Mon. close Pct. Bank high-low and change change Chase Manhattan $59.63-$32.63 $59.63, +6.63 +12.5% Chemical Banking 60.13-35.75 60.13, +5.75 +10.6% Sumitomo Bank Cal. 25.50-22.00 23.50, +1.50 +6.8% First Interstate 93.13-67.25 93.13, +3.75 +4.2% Mellon Bank 44.88-30.63 43.63, +1.63 +3.9% Norwest Corp. 30.50-22.63 30.50, +1.00 +3.4% BancOne 35.13-25.13 33.88, +0.88 +2.7% BankAmerica 56.75-39.50 56.75, +1.38 +2.5% Barnett Banks 57.13-38.25 57.13, +1.38 +2.5% Wells Fargo 187.38-141.00 186.75, +2.63 +1.4% Citicorp 66.50-38.50 66.50, +0.88 +1.3% NationsBank 62.13-44.63 62.13, +0.63 +1.0%
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Source: Reuter
