Silver Soars on Buffett News; Dow Off 30
Stocks closed mixed Wednesday, but silver futures soared to 9 1/2-year highs as speculators flooded into the market on news that renowned investor Warren Buffett was buying up the precious metal.
The dollar fell to a three-month low against the Japanese yen amid increasing signs that Japan will soon move to stimulate its economy. Bonds were mixed.
With his plunge into silver, Buffett could be sending a signal to the legion of stock-market players who follow his every move: Be careful out there.
That, at least, was one interpretation offered by analysts Wednesday trying to explain why perhaps the greatest stock picker of his time is investing in a commodity--the financial world equivalent of basketball star Michael Jordan taking up baseball.
“He’s making a statement about his inability to find attractive values in the stock market,” said Michael Metz, strategist at New York brokerage CIBC Oppenheimer. “He may feel the real values are in the commodity area.”
Berkshire Hathaway, Buffett’s Omaha-based company, has bought 129.7 million ounces of silver since July, which may be about one-fifth of the world’s estimated supply at the end of 1997.
In stock markets, investors cashed in profits in some of the hotter sectors this week, such as drug and bank shares, but new buying in technology made that sector sizzle.
The Dow Jones industrial average closed down 30.64 points at 8,129.71, taking a breather after two days of gains had propelled it up nearly 250 points. In the broader market, advancing issues still led decliners, 1,581 to 1,276, on active volume of 694 million shares on the New York Stock Exchange.
The technology-heavy Nasdaq composite index rose 14.10 points to 1,680.44.
The profit-taking in stocks was focused on large issues that led the recent rally, including bank, drug and economically sensitive shares.
“It’s just profit-taking in the large-cap names,” said Peter Coolidge, senior equity trader at Brean Murray & Co.
But the broader market maintained its ascent, with the Standard & Poor’s 500 ending at its fourth record closing high in five sessions. The S&P; 500 rose 0.90 of a point to 1,006.90.
“This market’s doing a very credible job of hanging in there,” said Thom Brown, managing director of Rutherford, Brown & Catherwood.
Investors showed little reaction to a widely anticipated decision by the Federal Reserve Board to leave interest rates unchanged. “The market had already factored that into the equation,” Coolidge said.
The central bank left the overnight Fed funds rate, a benchmark for borrowing costs throughout the economy, at 5.5%. The discount rate, at which the Fed extends emergency loans to commercial banks, remains at 5.0%.
The bellwether 30-year Treasury bond ended little changed, with its yield at 5.86%, the same as Tuesday.
Among Wednesday’s highlights:
* Participants in the tech-stock rally included Cisco Systems, up $1.56 to $64.56 after the company reported a jump in earnings. PC maker Compaq Computer rose $1.75 to $34.75. Intel gained for a second day, rising $1.25 to $87.56, and software maker PeopleSoft rose $1.88 to $39.88 after reporting better-than-expected earnings.
Netscape Communications rose $1.06 to $19.25 on speculation that Sun Microsystems may buy it. Sun rose 38 cents to $49.
* Stocks of silver-mining companies rose on the news about Buffett’s buying. Apex Silver Mines, which is 26%-owned by Buffett, rose $1.56 to $12.88. Sunshine Mining & Refining gained 44 cents to $1.56, Coeur d’Alene Mines rose $1.94 to $10.81 and Hecla Mining jumped $1.06 to $5.88.
News of Buffett’s buying sent an already revived silver market into overdrive. Silver for March delivery rose 40.5 cents to $7.02 an ounce on the Comex division of the New York Mercantile Exchange.
The dollar edged lower after the Fed announced its decision on rates, but traders said the currency’s decline was due mostly to a rise in the yen on expectations of Japan’s plan to stimulate its economy.
The dollar stood at 123.63 Japanese yen late in New York, down from 125.94 late Tuesday.
Market Roundup, D8
