FINANCIAL MARKETS : Blue Chips End Higher, Boosted by AT&T; Move
Blue-chip stocks closed sharply higher Wednesday as AT&T; Corp. soared on news that it will split into three public companies, snapping the market out of a three-session losing streak.
Meanwhile, the dollar dropped after the Commerce Department reported a widening trade deficit and investors grew pessimistic that a new Japanese economic stimulus plan would shrink the country’s trade surplus.
The Dow Jones industrial average ended up 25.65 points at 4,792.69. In the broader market, advancing issues led decliners 1,184 to 1,039 on active volume of 399 million shares on the New York Stock Exchange.
AT&T; closed 6 1/8 higher at 63 3/4 on heavy volume of nearly 28 million shares in composite trading.
“The storm clouds gathered together and then we had a ray of light with AT&T;,” said Ron Hill, an investment strategist at Brown Bros. Harriman.
The Nasdaq rose 4.77 points to 1,065.09 on continued strength in technology stocks.
The big news was AT&T;’s announcement that it will split into three public companies, a move that Wall Street reckoned would sharply increase the value of the telecommunications giant’s stock.
Under AT&T;’s plan, the three companies will embrace communications services, communications equipment and transaction-intensive computing. A fourth company, AT&T; Capital Corp., will be sold outright. AT&T; also said it will cut 8,500 jobs in its Global Information Solutions unit.
“It shows U.S. corporations are not anorexic and still have the ability to look at [their] businesses and shed costs when necessary and continue to grow,” Hill said. Wall Street also focused on other corporate announcements, such as Colgate-Palmolive’s major restructuring and Seagate Technology’s decision to merge with Conner Peripherals.
“We had a great deal of surprise news before the opening and then the market did its best to absorb it for the rest of the day,” said Marty Kearney, a trader at PTI Securities. “It was hectic and the phones never stopped ringing.”
David Shulman, chief equity strategist at Salomon Bros., said that without the gain in AT&T; shares, the Dow index would have been mostly flat.
Among Wednesday’s highlights:
* Crown Cork & Seal lost 2 1/8 to 36 5/8. It fell 5 3/8 on Tuesday after forecasting its 1995 per share earnings would be less than the $2.29 it reported a year ago.
* SHL Systemhouse jumped 5 1/64 to 12 41/64 on the Nasdaq after MCI Communications said it agreed to buy the Canadian computer out-sourcer for $1 billion or $13 a share.
* Colgate Palmolive shed 4 5/8 to 67 1/8.
* Polaroid shed 3 5/8 to 39 1/8 after the company forecast third-quarter results would be substantially below earlier estimates.
* Conner Peripherals added 1/2 to 17 3/8 after Seagate Technology and Conner agreed to merge in a stock swap. Seagate lost 2 to 45 1/4. 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.
* Premenos jumped 47% or 8 1/2 to 26 1/2 in its first day of trading.
The Standard & Poor’s composite index of 500 stocks rose 2.57 points to a record high of 586.77. The American Stock Exchange index rose 3.88 to 551.00.
The NYSE Composite index of all listed common stocks rose 1.22 points to a new high of 314.33. The average share was up 15 cents.
In late New York trading, the dollar ended at 102.65 yen, down from 104.63 yen Tuesday when it hit a 15-month high during intra-day trading.
The dollar declined against the mark after the Commerce Department reported that the U.S. trade deficit grew a larger-than-expected 1.9% in July to $11.5 billion. The deficit with Western Europe was the highest since July, 1987.
In bond trading, the yield of the benchmark 30-year bond fell to 6.46% from 6.48% late Tuesday amid optimism the economy’s growth rate is moderate enough to keep inflation from accelerating.
Overseas, London’s FTSE 100 index closed 20.1 points higher at 3,561.5.
In Tokyo, the Nikkei average closed down 275.74 points at 18,198.64.
In Mexican trading, the key Bolsa index closed off 5.4 points at 2,555.66.
Market Roundup, D8
