FINANCIAL MARKETS : Dollar Gains but Dow, Bonds End Weaker : Markets: Foreign stocks take big hit on jitters over U.S. currency.
The dollar’s free fall was halted Friday but U.S. stock and bond markets still finished with broad losses for a second session.
Foreign stock markets suffered much worse damage, however, on renewed fears of a weakened buck.
On Wall Street, the Dow Jones industrial average ended down 3.25 points at 4,764.15, snapping back from an early loss of nearly 40 points. For the week, the index lost 33.42 points.
Stocks slumped in the morning as bond yields surged for a second day, reflecting in part the dollar’s sudden selloff.
The U.S. currency had plummeted on Thursday as pessimism over Japan’s fiscal policies and currency turmoil in Europe caused widespread selling of dollars.
But on Friday, Clinton Administration officials hinted that world central banks are ready to help revive the dollar’s recent rally. Treasury Secretary Robert E. Rubin said twice Friday that “a strong dollar is very much in our national interest.”
The currency also got a boost from comments by the head of Germany’s central bank, Hans Tietmeyer, who said the dollar was undervalued and recent moves were exaggerated.
By the close in New York, the dollar was at 100.05 Japanese yen, up from 98.65 on Thursday but still down from 102.65 on Wednesday. It also rose to 1.4228 German marks from 1.4205.
Currency traders “are all tuckered out after the last couple of days,” said Mellon Bank analyst Kevin Lawrie, noting that activity was thin Friday.
In the U.S. bond market, an initial jump in yields brought new buyers in, and yields ended the day below their highs.
By the close of trading, the bond market appeared almost nonplussed by Federal Reserve Board Chairman Alan Greenspan’s upbeat assessment of the economy, which he delivered in congressional testimony. Greenspan’s comments seemed to preclude any chance of the Fed lowering short-term interest rates at its meeting next week.
The benchmark 30-year Treasury bond yield, which had soared from 6.46% on Wednesday to 6.56% on Thursday on the dollar’s weakness and on fresh signs of economic strength, rose as high as 6.61% on Friday but ended at 6.58%.
Some traders said the bond market’s tone was helped when House Speaker Newt Gingrich backed away from a pledge Thursday to allow the government to default on debt payments this fall if the budget battle between Congress and the White House is still raging.
A decline in some commodity prices also helped bonds.
In the stock market, meanwhile, most major indexes suffered only minor losses. But selling was widespread: Losers topped winners by more than 2 to 1 on the New York Stock Exchange in active trading.
Worries about third-quarter corporate earnings continue to cloud the market’s near-term outlook, analysts warn.
Among Friday’s highlights:
* Industrial issues that may be most vulnerable to earnings disappointments led the market lower. TRW slid 4 3/8 to 75 3/8, B.F. Goodrich fell 1 1/8 to 62, machinery maker Varity dropped 1 5/8 to 43 7/8 and Chrysler tumbled 1 7/8 to 53 5/8.
In the latest disappointment, General Signal plunged 4 1/2 to 30 5/8 after warning of weaker earnings.
* Profit takers also hit financial stocks again. Dean Witter lost 1 to 53 7/8, H.F. Ahmanson fell 1 to 24 and Wells Fargo eased 1 to 184 1/8.
* On the upside, many drug and food stocks continued to advance as buyers sought companies with relatively stable earnings-growth expectations. Merck rose 1 to a record 57 1/2, American Home Products jumped 1 3/8 to 84 3/8, Coca-Cola gained 1 1/8 to 70 5/8 and Anheuser-Busch rose 1 to 61 5/8.
Overseas, foreign stock markets bore the brunt of concerns over the dollar’s sudden weakness. A falling dollar could make life much more difficult for foreign exporters.
In London, the FTSE-100 index sank 43.1 points, or 1.2%, to 3,514.8. The Paris exchange’s key index plunged 3.4% and Frankfurt’s DAX index slid 3.3%.
In Tokyo, the Nikkei-225 index dropped 1.8% to 17,713.93. Mexico City’s Bolsa index gave up 42.20 points, or 1.7%, to 2,514.90.
