Blue Chips Edge Higher; Fed Meets Today
Blue-chip stocks edged higher Tuesday, ending a three-session slump, but the broad market finished mostly lower after drifting through a lazy holiday session.
The Dow Jones industrial average surrendered an early gain for the second straight day, but it turned higher during the final hour and rose 6.14 points to close at 7,558.73.
With the Treasury bond market closed for Veterans Day and a Federal Reserve Board meeting scheduled for today, there was little conviction behind the stock market’s moves in either direction.
While Fed officials might be tempted to raise interest rates to slow the economy and ease inflationary pressures, such a move is seen as unlikely because it could fuel another wave of global financial turmoil by draining more investment capital from foreign markets.
“The likelihood of [Fed Chairman Alan] Greenspan raising rates tomorrow is really not very high,” said Tim Morris, chief investment officer of Bessemer Trust, which oversees more than $15 billion in assets.
On Thursday, Greenspan testifies before lawmakers on the financial turmoil in Asia and its impact on the economy.
Asian markets were largely calm Tuesday.
The dollar rose to a six-month high against the yen on expectations that U.S. and Japanese officials will let the yen weaken further as Japan’s economy continues to suffer.
Earlier this year, finance officials in Japan complained when the dollar rose above 120 yen, prompting traders to sell dollars.
“Now they’re likely to say let’s lay off, or they’re going to fall into a full-fledged depression,” said Dave Moline, a currency trader at Norwest Bank in Minneapolis. “Japan has to let the yen devalue to compete” with other exporters.
The dollar rose to 125.03 yen, up 0.63 from Monday. Earlier, it rose as high as 125.38, its highest since May 7. The dollar also rose to 1.7083 German marks from 1.7041.
Trading was thin because of the Veterans Day holiday in the U.S. and Armistice Day in some European countries.
The Dow’s biggest decliner was Eastman Kodak, which slid $4.06 to $62.19 after announcing plans to cut 10,000 jobs and take a $1-billion pretax restructuring charge in the fourth quarter. Traders said Kodak’s restructuring plan fails to show clearly how the world’s biggest photography firm will tackle tough competition from rivals.
The Standard & Poor’s 500-stock index rose 2.65 points to 923.78, and the New York Stock Exchange composite index rose 0.79 point to 485.66.
However, measures dominated by secondary issues ended lower. The Russell 2,000 index of smaller companies fell 1.97 points to 433.43, the Nasdaq composite index fell 6.81 points, or 0.4%, to 1,583.91, and the American Stock Exchange composite index fell 0.04 point to 680.43.
The Wilshire Associates equity index--the market value of NYSE, American and Nasdaq issues--rose 8.27 points, or 0.09%, to 8,925.59.
Among Tuesday’s highlights:
* Caterpillar fell $2 to $48.19 on worries about Brazil’s economic woes. Analyst Charles Harris of CIBC Oppenheimer cut his rating on the heavy-equipment maker’s stock to “underperform” from “hold.”
* Pennzoil fell $7.75 to $67.75 after Union Pacific Resources Group threatened to end its $6.4-billion takeover bid.
* WorldCom lost 69 cents to $30.31 and MCI Communications fell 19 cents to $41.31, a day after MCI agreed to WorldCom’s $37-billion buyout offer.
Brazil’s blue-chip index, the Bovespa, ended down 3.3%.
Overseas, Tokyo’s Nikkei stock average rose 1.1%, Frankfurt’s DAX index fell 0.6% and London’s FTSE-100 fell 0.3%.
Oil prices rose 11 cents to $20.51 a barrel on the New York Mercantile Exchange on continued tensions between the United Nations and Iraq over arms inspectors. Oil traders fear that the dispute could prompt Baghdad to cancel U.N.-monitored sales of a million barrels of oil a day.
*
Market Roundup, D12
