FINANCIAL MARKETS : Stocks Stage Indecisive Recovery; Yields Fall
Stocks ended higher Wednesday, led by technology and transportation issues, but the market posted an indecisive comeback from Tuesday morning’s pummeling.
“I think probably the fact that we didn’t get a better rally than we have gotten after [Tuesday’s] sharp reversal may mean that the market’s correction is not yet over,” said Richard McCabe, Merrill Lynch & Co.’s chief market analyst.
The Dow Jones industrial average rose 14.45 points to 4,735.25 after swinging widely throughout the session. The Dow was down as much as 8 points and up as much as 20, then lost nearly all of its gains in the afternoon before elbowing higher into the close.
Advancing issues led decliners by about 9 to 5 on the New York Stock Exchange, where volume was moderately heavy at 340.72 million shares, down from 412.70 million on Tuesday.
Broad market indexes were pushed higher by a strong performance in technology stocks. The Nasdaq composite index surged 18.10 points, or 1.8%, to 999.56.
The NYSE’s composite index rose 1.10 points to 310.51. The Standard & Poor’s 500-stock index added 1.94 points to 579.46, and the American Stock Exchange’s market value index gained 2.32 points to 527.54.
Investors watched closely for signs that a comeback that started late Tuesday could be sustained. On Tuesday, the Dow plunged 66 points before recovering to end just 5.42 points lower.
Ned Riley, chief investment officer at Bank of Boston, said the market recovered because fears about the quality of third-quarter earnings, which precipitated Tuesday’s selloff, have abated.
“The prevailing opinion is that most of the negatives are already out on the third quarter,” Riley said.
But several investors remained concerned about the concentration of funds in technology shares.
“There’s such exposure and concentration in technology stocks,” said Mickey Misera, managing partner in charge of equity trading at Alex. Brown & Sons Inc., “that if [funds] do decide to sell, they could take the whole market down with them.” He said the big question is whether small investors, through mutual funds, will dump technology issues.
Among Wednesday’s highlights:
* Motorola, which had been hit hard when its 31% third-quarter profit gain failed to meet analyst expectations, reversed some of Tuesday’s losses. Shares rose 3/8 to 64 3/8.
* Seagate Technology, the California maker of computer disk drives, rose 1 3/8 to 40 5/8 after reporting favorable quarterly profits and higher demand.
* Investors shrugged off news of the resignation of James P. Manzi, chief executive of IBM-owned Lotus Development. Big Blue’s shares climbed 1 3/4 to 92 1/2.
* In Nasdaq trading, Intel added 1 1/4 to 62 7/8 and Microsoft rose 2 7/8 to 86 5/8.
* Transportation stocks were strong, with railway and airline stocks up sharply. The Dow Jones transportation average rose 33.49 points to 1,925.80.
* Also reversing Tuesday’s declines were brokerage stocks, partially in response to a stabilization in interest rates. Merrill Lynch rose 1 to 60 and Salomon Bros. rose 7/8 to 38 3/4. Bank stocks, which also tend to rise when interest rates fall, were broadly higher. Bankers Trust rose 1 1/8 to 68 7/8.
In bond trading, traders and investors were playing it safe before the government releases inflation reports today and Friday, traders said. The yield on the benchmark 30-year government bond fell to 6.43% from 6.44% on Tuesday.
The government will report today on producer price inflation during September.
The dollar rose against major European currencies, buoyed by the French franc’s rebound against the German mark.
The U.S. currency also drew support from speculation that the world’s leading central banks might buy dollars to back up the Group of Seven industrial nations’ call for a stronger dollar, traders said.
In late New York trading, the dollar ended at 101.00 yen, up from 100.70 on Tuesday.
In commodities trading, corn and soybean prices rose sharply in reaction to a government forecast of smaller crops and strong demand that will reduce supplies next year to their lowest since the 1970s.
In other commodity markets, cotton prices slumped while copper prices rebounded. The Commodity Research Bureau’s index of 21 commodities rose 1.08 points to 240.82.
The Agriculture Department estimated corn production this year at 7.54 billion bushels, 25% below last year’s record crop and below even the most pessimistic of analysts’ predictions. Corn prices jumped to their highest levels since July, 1988, the last year of severe drought in the Midwest.
The government pegged soybean production at 2.19 billion bushels, slightly below expectations.
It said a hot summer and an early frost last month have reduced crop production.
Market Roundup, D6
