Stocks, Dollar, Bonds Shake Off Asian Turmoil
U.S. markets’ on-again, off-again concerns about Asia turned off again Tuesday, as blue chips rose and long-term bond yields eased despite heavy selling overnight in Asian markets.
Meanwhile, the dollar hit a five-year high against the yen, and gold slid again, falling early today in Asia below $300 an ounce for the first time since 1985.
On Wall Street, the Dow Jones industrials gained 41.03 points to 7,808.95 after sinking 113 on Monday.
Blue chips’ gains occurred even though Tokyo stocks fell 5.1% overnight, to 15,867 on the Nikkei-225 index, amid growing gloom over the health of Japan’s financial system.
But broad U.S. stock market indexes were mixed. Winners topped losers 15 to 14 on the New York Stock Exchange, but smaller stocks were weaker, with losers topping winners 24 to 18 on Nasdaq.
The Russell 2,000 index of smaller stocks eased 0.92 point to 426.91.
From the Dow’s point of view, at least, “the market isn’t saying, ‘Yahoo!’ It’s saying, ‘We’ve seen what’s happened in Tokyo and now it’s back to business as usual in a very good economic environment,’ ” said Alfred E. Goldman, director of market analysis at A.G. Edwards & Sons of St. Louis.
Compounding the volatility in Japan, stocks slid 2.5% in South Korea on Tuesday amid fears that an international bailout package for that troubled economy will carry tough terms.
Wall Street may have been emboldened by European markets, which stabilized Tuesday after suffering heavy losses Monday on Asian fears. Frankfurt’s DAX index rose 0.5% on Tuesday.
In currency trading, the dollar rose against the Japanese yen, touching a five-year high amid fears the country’s banking woes would worsen.
The yen’s decline was hastened by talk that more Japanese banks were on the brink of bankruptcy and news that Tokuyo City Bank, a secondary regional bank, would close its doors, transferring its operations to other regional banks.
The dollar rose as high as 128 yen overnight before retreating to 127.07 yen in New York, still up from Monday’s 126.80.
“Investors are going to keep buying anything they perceive as safe-haven currencies like the Swiss franc and the mark,” said Greg Schwake, dealer at Commerzbank in New York.
Meanwhile, U.S. bond yields eased after traders snapped up the government’s $11 billion of new five-year notes amid optimism that Treasury securities will remain popular as a haven from turbulent world markets.
At its auction, the Treasury sold the five-year notes at a yield of 5.77%, the lowest auction yield in almost two years.
The yield on the benchmark 30-year Treasury bond slipped to 6.05% from 6.06% on Monday.
More signs of healthy U.S. economic growth may have helped boost confidence on Wall Street.
The economic trouble in Asia and Latin America “is definitely going to have an effect on earnings” for U.S. companies, said Barbara Marcin, senior equity portfolio manager at Citibank Global Asset Management. “But the U.S. economy is still most important to U.S. stocks. Whatever happens overseas is still at the margin.”
Among Tuesday’s highlights:
* Blue-chip winners included Boeing, up $1.75 to $51.38; Coca-Cola, up $1.56 to $64.13; and IBM, up $4.25 to $107.38.
* Other tech winners included Microsoft, up $3.50 to $139; Dell, up $1.56 to $81.31; and Qualcomm, up $1.38 to $68.38.
* Utility stocks continued to attract investors seeking safe haven. Bell Atlantic jumped $2.13 to $86.69 and Edison International rose 50 cents to $27.31.
* Gold stocks fell as gold futures in New York lost $3.20 to $300.50 an ounce.
