Dow Inches Up to Another Record on Eve of Fed Meeting
Blue-chip stocks snapped back from a sharp sell-off to close in record territory Monday as bond yields dipped ahead of today’s meeting of the Federal Reserve Board’s interest-rate policy group.
The Dow Jones industrials ended up 6.28 points at 5,894.74, which surpassed the record close of 5,889.20 for Sept. 16. Early in the day, the index was off 53 points.
But broader measures finished lower, and declining issues beat advancers 1,425 to 863 on moderate volume of 297 million shares on the New York Stock Exchange.
“We’re just seeing statistical noise in anticipation of the Fed meeting tomorrow,” said Charlie Crane, director of research at Spears Benzak Salomon & Farrell. “There were some nervous Nellies selling stock at the open, and then this afternoon we had bargain-hunters,” he said.
The yield of the government’s main 30-year bond eased to 7.02% from 7.04% late Friday.
Bond traders apparently believe the Fed will not raise interest rates at its policy-making Federal Open Market Committee meeting today.
The moves in stocks and bonds persisted even after the government announced a large gain in the federal deficit, to $41.83 billion in August from $33.85 billion.
Despite the monthly rise, the Treasury Department said the deficit so far this year is 15.9% below the $171.1 billion for the same period of 1995.
When the fiscal year ends this month, the deficit is expected to have declined for a fourth straight year and be at the lowest level in seven years.
Stock analysts declined to put much credence in the market’s comeback late Monday, noting that volume was light because of the Yom Kippur holiday and uncertainty about the Fed’s rate decision. Activity was said to be dominated by short-term traders.
“I don’t think today is going to give you any idea what investors believe about the direction of the economy,” said Hugh Johnson, market strategist at First Albany Corp.
David Bostian, chief economist and investment strategist at Herzog, Heine, Geduld Inc. in New York, said he does not believe the economic data justify an increase in interest rates by the central bank but that it’s been “too close to call” whether the Fed will raise rates.
Among market highlights:
* Templeton Russia Fund, the only NYSE-listed mutual fund that trades exclusively in Russian shares, lost 1 1/4 to 21 1/2. Russian President Boris Yeltsin’s doctors have recommended postponing heart surgery for Yeltsin for two months to let him get stronger before they operate.
* Lehman Bros. rose 1/8 to 22 7/8 after hitting an intra-day high of 24 1/4. Lehman, whose shares rose Friday on takeover speculation, said it knew of no business reasons to account for the unusual activity in its shares and declined to confirm or deny if it may be a takeover candidate.
* Exide Electronics climbed 3 1/2 to 12 5/8 on news that it won an Air Force contract with a potential value of $625 million to make power supply systems.
* Diamond Shamrock rose 3/8 to 30 5/8 and Ultramar added 1 3/8 to 29 7/8 after the energy exploration companies agreed to a merger of equals in which each share of Diamond Shamrock will be converted into 1.02 shares of Ultramar.
* Technology stocks were broadly lower. Traders said they were making up for strong gains last week. Although Dow component IBM finished up 1 1/4 at 124 1/4, Intel lost 1 5/8 to 95 3/4, Dell Computer dropped 1 9/16 to 84 15/16, and Sun Microsystems slid 1 3/8 to 60 3/8.
The Tokyo stock market was closed for a holiday. The FTSE-100 index in London finished down 1.12% as traders factored in the possibility of a U.S. rate increase. The DAX index in Frankfurt fell 0.72%.
Market Roundup, D10
