FINANCIAL MARKETS : Dow Rebounds, Cold Spell Spurs Energy Prices
The Dow Jones industrial average rebounded Monday after two losing sessions, fueled largely by a surge in oil stocks on weather forecasts for continued cold around much of the country.
The news also spurred a rally in energy and grain prices.
The Dow gained 27.46 points to 5,184.32, boosted by strong finishes in shares of Exxon, Chevron and Texaco.
In the broad market, advancing issues led decliners by a slim margin on the New York Stock Exchange in lethargic trading. The NYSE’s composite index rose 1.15 points to 330.17 and the Standard & Poor’s 500-stock index gained 2.04 points to 619.52.
But a mixed performance in technology shares kept the Nasdaq composite index flat. It inched down 0.91 point to 1,061.50.
Freezing conditions in both Europe and North America sparked a rally in energy and grain prices that took a leading commodity index to a 5 1/2-year peak Monday, although the day’s gains melted away in late trading.
Analysts said the renewed rise in commodity prices, while likely to remain gradual, was broad based and could eventually spark concerns about inflationary pressures.
“What we’ve seen over the last few years is the CRB [commodity index] grind higher. I think that’s going to continue,” said Jack McIntyre, market strategist for MCM Tradewatch. But “I’m not looking for things to explode higher.”
The Knight-Ridder Commodity Research Bureau’s cash index of 17 commodity futures rose to a 5 1/2-year high of 246.22 points during trading, although by the close it had fallen back to 245.34, up 0.17 point.
January heating oil futures on the New York Mercantile Exchange leaped as high 58 cents a gallon--a 33-month high--with freezing conditions in both Europe and North America seen boosting demand. But the price edged lower late in the day to finish up 0.16 cent at 56.75 cents a gallon.
Wheat futures on the Chicago Board of Trade rose to a 15-year high, continuing their powerful recent advance. “It’s a weather market, pure and simple,” said Steve Bruce of E.D. and F. Man International.
December wheat set a peak of $5.25 a bushel but closed well off its highs at $5.185, up 1 cent.
Soybean futures rose to a 17-month high, also boosted by weather worries with dry conditions in key South American growing areas delaying planting.
“There is talk that the dryness in southern Brazil may be spreading to Argentina,” said Mark Cermak of O’Connor & Co. January soybean futures in Chicago climbed to a peak of $7.205 a bushel and closed up 5.25 cents at $7.145.
With no fresh economic reports on which to trade, stock market investors instead refocused on whether the Federal Reserve Board will cut interest rates at its policy-making meeting on Dec. 19.
A barrage of weak economic figures in recent months has led many investors to believe that an easing will come by year-end, and that has provided a positive catalyst for both bonds and stocks.
On Monday, the bond market rallied weakly. The 30-year Treasury bond yield slipped to 6.04% from 6.05% on Friday.
Some investors also are looking for interest-rate cuts in Europe soon. “If they do cut in Germany, then we could see other European countries lower their rates and then probably the Fed will also,” said Leon Brand, global market specialist at NatWest Securities in New York.
In the near-term U.S. markets will have to contend with fresh economic data. The Labor Department is scheduled to release its November wholesale inflation report today. November consumer price inflation will be reported Wednesday.
If inflation rose faster than expected in November, it could “clip some of the spirit” from Wall Street’s rally, on the assumption that the Fed might delay a rate cut, said A.C. Moore, senior investment strategist at Dunvegan Associates.
Among Monday’s highlights:
* The Dow oil stocks led the index higher. Exxon gained 2 3/8 to 84 1/8, Texaco rose 3/4 to 79 1/8 and Chevron surged 1 9/16 to 52 3/4.
* Many bank issues were lower amid concern about the Fed’s next move. Citicorp fell 2 1/16 to 67 3/4, Norwest lost 7/8 to 33 1/8, NationsBank dropped 5/8 to 73, Fleet Financial eased 5/8 to 41 1/4 and Bank of Boston gave up 7/8 to 46 5/8.
* Technology issues, which have been volatile recently, were mixed ahead of the Semiconductor Industry Assn.’s Monday report on demand for computer chips during November.
After the market closed the SIA said the industry’s book-to-bill ratio fell to 1.14 from 1.18 in October. That means chip makers got $114 in new orders in November for every $100 of chips shipped.
Among tech issues, Intel added 1/4 to 63 1/2 and Cirrus Logic gained 1 1/2 to 28, but Sun Microsystems was down 2 at 97 3/4 and Microsoft fell 1 3/8 to 93 1/8.
Meanwhile, software firm Broderbund surged 3 5/16 to 61 5/16. Paul Allen, a co-founder of Microsoft, disclosed that he has acquired a 5% stake in Broderbund for investment purposes.
* Timber and paper product stocks were weaker after Merrill Lynch downgraded the group. Champion International shed 1 5/8 to 42 7/8, Georgia-Pacific fell 2 1/4 to 71 and International Paper lost 1/2 to 36 1/2.
On Friday, the American Forest & Paper Assn. said the U.S. pulp and paper industry plans to increase its manufacturing capacity by 2.5% a year through 1998, faster than the 2%-a-year increase forecast last year for 1994-1997.
Greater capacity will mean more output and could restrict the companies’ pricing ability.
* In the takeover arena, Maybelline surged 5 1/4 to 36 1/4 after it agreed to be bought by French cosmetics giant L’Oreal for $36.75 a share.
* Among new stock issues, Visioneer, a maker of intelligent paper input systems, jumped 6 to 18 in its first day of trading.
In foreign trading, Tokyo’s Nikkei-225 index slipped 0.3%.
Mexico’s Bolsa index slumped, falling 47.55 points, or 1.8%, to 2,607.84 on fears of higher interest rates.
In Europe, Frankfurt’s DAX index rose 0.2% and London’s FTSE-100 index rose 0.6%.
