Silver Soars on Buffett News; Stocks Mixed
Silver prices rocketed Wednesday on news that Warren Buffett is a big holder, while the dollar plummeted on more signs that Japan will stimulate its economy.
On Wall Street, most stocks finished higher, but the Dow Jones industrials eased 30.64 points to 8,129.71 amid mild profit-taking.
The Standard & Poor’s 500 index, however, inched up to another record high, adding 0.90 point to 1,006.90, as winners topped losers by 16 to 13 on the New York Stock Exchange in heavy trading.
The silver market grabbed the spotlight Wednesday in the wake of Buffett’s announcement late Tuesday that his Berkshire Hathaway bought 129.7 million ounces of silver between July 25 and Jan. 12.
Some analysts estimated that Berkshire’s total is one-fifth of the world’s current silver stockpile.
Buffett, who normally is a long-term investor, said he has no plans to sell the silver, which he said he purchased because demand has been outrunning supply.
Silver zoomed 39.5 cents to $7 an ounce, a 9 1/2-year high, in New York futures trading Wednesday. The price has been rising sharply in recent weeks.
Gold gained in sympathy, adding $4.20 to $300 an ounce.
“There are a lot of people who are going to get drawn into the silver market because of the name Warren Buffett,” said Michael Martin, trader at Sinclair Group, part of R.F. Lafferty in New York.
Some analysts said Buffett’s foray into silver was strange, given that he usually deals exclusively in companies and individual stocks. Last summer, however, he was rumored to be a big buyer of bonds.
Buffett’s silver move may be another sign that he believes there are few stocks worth buying today, some Wall Streeters said.
“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.”
Still, Buffett remains a major investor in companies such as Coca-Cola, Gillette and Wells Fargo. The silver investment amounts to less than 2% of Berkshire’s investment portfolio.
While silver soared Wednesday, the dollar took a hit, plunging 2.31 Japanese yen to 123.63 yen in New York, a three-month low.
Japan’s ruling Liberal Democratic Party said it will unveil economic proposals Feb. 20, including tax cuts and increased public spending, to pull the economy out of a six-year slump. That could strengthen the yen.
Yet the dollar’s drop didn’t disturb U.S. stocks or bonds. The bond market was basically flat, with the 30-year Treasury bond yield unchanged at 5.86%, showing no reaction to the Federal Reserve Board’s widely expected decision to leave interest rates alone.
Short-term yields slid, however. The three-month T-bill yield fell to 5.10% from 5.23% on Tuesday.
In the stock market, 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 tech-heavy Nasdaq composite index rose 14.10 points to 1,680.44.
“This market’s doing a very credible job of hanging in there,” said Thom Brown, managing director of Rutherford, Brown & Catherwood.
Among Wednesday’s highlights:
* Tech issues rising included Cisco Systems, up $1.56 to $64.56 after the company reported strong earnings. Compaq Computer rose $1.75 to $34.75, Intel gained $1.25 to $87.56 and American Power Conversion rose $1.63 to $28.50.
Also, Netscape Communications rose $1.06 to $19.25 on speculation that Sun Microsystems may buy it. Sun was up 38 cents at $49.
* On the downside, drug stocks losing ground included Pfizer, down 94 cents to $81.38, and Merck, down $1.25 to $115.
* Beaten-down oil services shares rebounded, with Halliburton up $3.25 to $47.75 and Baker Hughes gaining $2 to $40.38.
* Stocks of silver-mining companies surged on news of Buffett’s stake. 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 leaped $1.94 to $10.81 and Hecla Mining jumped $1.06 to $5.88.
In foreign trading, Asian markets were mixed, with Hong Kong down 2.1% while Tokyo slipped 0.8%. Singapore was up 0.5%.
In Europe, the German market fell 1% from Tuesday’s record high.
Market Roundup, D8
