FINANCIAL MARKETS : Blue Chips End Higher, Boosted by AT&T; Move
Stocks closed broadly higher on Wednesday, boosted in part by AT&T;’s surprise decision to split itself into three companies.
The news helped erase some of the losses the market has suffered in recent days on increasing worries over corporate earnings.
Meanwhile, the dollar dropped sharply after the government reported a widening U.S. trade deficit and investors grew pessimistic that a new Japanese economic stimulus plan will shrink that country’s huge trade surplus.
On Wall Street, the Dow Jones industrial average ended up 25.65 points at 4,792.69, with AT&T;’s jump of 6 1/8 to 63 3/4 accounting for a major portion of the rise.
In the broad market, winners topped losers by 12 to 10 on the New York Stock Exchange in heavy trading that was swelled by AT&T;’s action. Nearly 28 million AT&T; shares changed hands.
Analysts said AT&T;’s decision to try and boost shareholder value by splitting into three entities offered investors more hope that stocks have further to rise.
“It causes corporate America to think out their own strategies and perhaps re-evaluate their own business lines to see if there is a more optimal way to manage their own businesses,” said James Margard, a money manager at Rainier Investment Management, which has $1.7 billion in assets.
The Dow had slumped Monday and Tuesday in part because of a flurry of corporate announcements warning of weak third-quarter earnings, generally tied to the sluggish U.S. economy.
Machinery giant Caterpillar, for example, dove 6 1/2 to 58 7/8 on Tuesday after saying third-quarter results will be below expectations.
There were more such announcements Wednesday, but they didn’t have the same general dampening effect on the market.
Nor did the dollar’s sudden slide ruffle stocks. In New York, the dollar ended at 102.65 Japanese yen, down from 104.63 on Tuesday, after the Commerce Department said the U.S. trade deficit grew a larger-than-expected 1.9% in July to $11.5 billion.
Some currency traders may be losing faith that the dollar’s recent rally can continue, because a growing trade deficit means more dollars are flooding overseas markets.
In other trading, bond yields finished slightly lower Wednesday, as investors await Federal Reserve Board Chairman Alan Greenspan’s congressional testimony on the economy Friday.
Among Wednesday’s highlights:
* AT&T;’s move may have helped boost shares of other phone giants. US West gained 7/8 to 47 7/8, Nynex jumped 1 1/8 to 48 5/8, Pacific Telesis added 3/8 to 30 and SBC Communications was up 1/2 to 54 5/8.
Among AT&T;’s long-distance rivals, MCI lost 5/8 to 25 7/8 but Sprint added 1/4 to 36 1/4.
AT&T; Capital, AT&T;’s financing arm, jumped 2 1/2 to 35 1/4. AT&T; will sell its majority stake in the business.
* Takeovers, real and imagined, moved some stocks. Computer disk drive maker Conner Peripherals soared 2 1/8 to 19 after Seagate Technology made a stock-swap offer. Seagate lost 2 to 45 1/4.
Meanwhile, Hutchinson Technology, a Seagate supplier, lost 8 1/4 to 70, and Read-Rite, a Conner supplier, fell 6 3/4 to 38 1/2.
* RJR Nabisco jumped 2 1/8 to 33 on news that corporate raider Carl Icahn may buy a stake in the firm. Other tobacco stocks gaining included Loews, up 4 3/4 to 144 1/4, and Philip Morris, up 3/4 to 80 5/8.
* Caterpillar added 1 to 59 7/8 after Tuesday’s dive. But other companies that have warned of weak near-term earnings saw their stocks fall further. Packaging firm Crown Cork & Seal tumbled 2 1/8 to 36 5/8 and Polaroid sank 2 to 39 1/8.
* In a new earnings disappointment, Colgate Palmolive said quarterly results will be hurt by economic woes in Mexico, where Colgate has extensive operations.
Although Colgate also announced major cost-cutting moves, its stock plunged 4 5/8 to 67 1/8.
* On the plus side, Coca-Cola leaped 1 5/8 to a record 69 1/8. It gave analysts a bullish assessment of third-quarter sales growth.
* Many health care stocks also continued to advance. PacifiCare A jumped 3 7/8 to 63 3/4, Biogen soared 4 to 56, Columbia/HCA added 1 1/8 to 49 and Merck rose 1 1/8 to 55.
In foreign trading, Tokyo’s Nikkei-225 index slumped 275.74 points to 18,198.64 as the dollar weakened. In Mexico City, the Bolsa index dipped 5.4 points to 2,555.68.
Market Roundup, D8
