U.S. Stocks End Mixed Amid Hopes for Brazil
Wall Street struggled to a mixed finish Wednesday, as investors focused on whether a new budget plan from Brazil can keep Latin America’s largest economy afloat--dimming the chances of global recession.
The Dow Jones industrial average, which was up 66 points at one point, ended up 5.93 points at 8,371.97.
The Nasdaq composite was much stronger, gaining 19.72 points, or 1.2%, to 1,737.35, as tech stocks resurged.
Still, winners had only a modest edge over losers on Nasdaq. And losers had the edge on the New York Stock Exchange.
The bullish bet is that $23.5 billion in tax increases and spending cuts announced by the Brazilian government will pave the way for an international aid package, staving off a currency devaluation that would slash profits for U.S. lenders and exporters.
“Brazil is in a tough spot, but not so tough it can’t wiggle out of it,” said Charles Crane, chief market strategist at Key Asset Management, which oversees $62 billion. “For U.S. companies, prospects in Latin America remain solid for the long haul.”
Latin American markets sold off on the Brazilian announcement, however. Brazil’s Bovespa index ended down 0.6% at 6,827. The Mexican market sank 1.9% and the Argentine market lost 3.6%.
In the U.S. bond market, yields rose after the Treasury announced plans to sell $38 billion of new debt next week. The yield on the 30-year T-bond climbed to 5.12% from 5.08% on Tuesday.
The Treasury sold new two-year notes at a yield of 4.03%.
Meanwhile, IBC’s Money Fund Report said the average seven-day compound yield on taxable money funds fell to 4.71% from 4.82% last week, continuing to slide in the wake of the Federal Reserve Board’s two interest rate cuts.
Among Wednesday’s highlights:
* In the tech sector, IBM rose $1.81 to a record $146.19 after announcing a $3.5-billion stock buyback Tuesday.
Other winners included Sun Microsystems, up $3.06 to $56.69; Dell, up $2.13 to $64.63; Micron Technology, up $2.31 to $35.69; and Broadcast.com, up $4.81 to $49.94.
* Also in the tech sector, better-than-expected earnings from America Online boosted the stock $2.13 to $124.13.
But EBay fell $2.50 to $80, even though the online auctioneer reported a ninefold increase in third-quarter profit. The stock had zoomed 64% in the previous two sessions.
* In the telecom sector, Intermedia Communications plunged $7.50 to $17.75 after the provider of phone and data services posted a wider-than-expected third-quarter loss.
* Interstate/Johnson Lane fell $6.44 to $30.56 after Wachovia agreed to buy the brokerage at a $5 discount to Tuesday’s closing price. The purchase was announced after the end of trading Tuesday.
In foreign markets, Japan’s Nikkei stock average fell 2.2%, Germany’s DAX index fell 3.1%, Britain’s FTSE-100 fell 0.7% and France’s CAC-40 fell 1.6%.
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Market Roundup, C6
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Money fund yields, C10
