Stocks, Bonds Unfazed as Fed Holds Tight
Stock and bond markets showed no particular joy--or relief--Tuesday as the Federal Reserve Board met and left interest rates alone, as expected.
Bond yields were largely unchanged, and blue-chip stocks eked out a gain, although the broad market had an up day overall.
Meanwhile, near-term oil futures prices tumbled to a decade low amid soaring oil supplies. In foreign trading, Asian and Latin American markets were mixed after Monday’s slump on concerns about Indonesia’s future.
On Wall Street, the Dow Jones industrials added 3.74 points to 9,054.65, after trading about 50 points higher earlier in the day.
The Fed opted not to tighten credit--a decision widely expected, given the country’s low inflation rate despite strong economic growth.
Asia’s woes also are believed to have helped stay the Fed’s hand.
“Everyone and their brother thought they would do nothing,” said Bruce Bittles, a market strategist at J.C. Bradford & Co. in Nashville.
Still, the broad market had its best session in more than a week, as winners topped losers by 17 to 13 on the New York Stock Exchange and by 22 to 19 on Nasdaq. Volume remained restrained.
Smaller stocks had a better day than blue chips. The Nasdaq composite index rose 14.25 points, or 0.8%, to 1,845.87. The Russell 2,000 index of smaller shares rose 0.7% to 470.86.
In the bond market, the 30-year Treasury bond yield ended at 5.93%, up from 5.92% on Monday.
In currency trading, the dollar remained robust, inching up to 136.44 yen, a 6 1/2-year high. The dollar has surged against the yen in recent days on worries that Japan’s struggling economy will soon be in worse shape, if Southeast Asia’s woes deepen.
A promise Tuesday by Indonesian President Suharto to step down after holding elections eased some tension, triggering a 6.4% jump in Indonesia’s main stock index. Tokyo’s Nikkei-225 index rose 1.1% and South Korea’s main index rose 1%.
In Latin America, which was hammered Monday with Asian markets, Brazil’s main index rebounded 1.4% on Tuesday. But Mexico’s market slipped 0.5%.
In commodity trading, the near-term crude oil future in New York sank $1.11 to $12.98 a barrel, lowest since 1988, as full storage tanks across the U.S. forced traders to sell contracts rather than take delivery.
“I’m not sure we could put another barrel in,” said Boyd Vratil, area manager for Texaco Trading & Transportation in Cushing, Okla., the delivery point for crude oil futures contracts. “This is the fullest it’s ever been.”
Total U.S. oil inventories are at five-year highs. Still, with summer driving season approaching, oil traders believe crude prices won’t stay this depressed for long.
Among Tuesday’s highlights:
* Major drug stocks were sharply higher. Bristol-Myers Squibb rose $2.06 to $111.19 after a study showed that the company’s Taxol, when added to standard post-surgery chemotherapy in the early stages of breast cancer, boosts the odds that a woman will survive.
Pfizer, the maker of the impotence drug Viagra, gained $2.13 to $112.81. The number of Viagra prescriptions filled in the week ended May 8 rose 6% from a week earlier, according to IMS Health, a research group.
* Bank stocks rallied, led by Chase Manhattan, which rose $2.63 to $144.88 after Chairman Walter Shipley said he expects double-digit per-share earnings growth.
Other winners included Citicorp, up $1.50 to $155.50; BankBoston, up $3.44 to $110.44; and J.P. Morgan, up $1.13 to $129.69.
* In the retail sector, Nordstrom gained 44 cents to $67.88 after declaring a 2-for-1 stock split--its first in 10 years.
Market Roundup, D12
