Stocks Close Mixed, Awaiting Fed Cut
Wall Street closed out another volatile weak with a mixed showing, as expectations for an interest-rate cut next week were weighed against concerns about investment-firm losses worldwide.
The Dow Jones industrial average ended up 26.78 points at 8,028.77, recovering from an early dive.
But losers still outnumbered winners by 16 to 15 on the Big Board and by 21 to 19 on Nasdaq.
The Nasdaq composite index rose a strong 1.4% to 1,743.59, but the Russell 2,000 index of smaller stocks was off 0.3%.
For the week, the Dow rose 1.7%.
Meanwhile, Treasury yields continued to sink, as markets prepared for an expected cut in the Federal Reserve’s benchmark short-term interest rate, now 5.5%, when the central bank meets on Tuesday.
Friday opened with Wall Street bracing for a rough day as news of the near-collapse of giant investment fund Long-Term Capital Management roiled foreign markets.
Overnight, Tokyo’s Nikkei-225 index slumped 3.4% to 13,723--nearing the recent 12-year low of 13,521. In Europe, the German market fell 1.8% and the French market lost 2.1%.
The near-demise of Long-Term Capital raised the specter that many other investment firms--including major banks and brokerages--have yet to announce their full losses amid global markets’ stunning swings of recent months.
But U.S. stocks recovered as investors focused on the virtual certainty that the Fed will cut its key rate by at least a quarter point and possibly by a half point.
“Everyone is counting on [Fed Chairman Alan] Greenspan lowering interest rates,” said Joe Joshi, chief investment officer at Systematic Financial Management in Fort Lee, N.J., which oversees $1 billion. “That will show he will not let a recession happen.”
“Concerns about the banking situation are now being offset by the possibility of a rate cut next week,” said Tony Dwyer, chief market strategist at Ladenburg Thalmann.
In the bond market, the 3-month T-bill rate fell to 4.38% from 4.47% on Thursday. The yield on 2-year T-notes dropped to 4.38% from 4.43% on Thursday.
And the bellwether long-term rate, the 30-year T-bond yield, closed at a new record low of 5.12%, down from 5.16%.
Among Friday’s highlights:
* Financial stocks were mixed. Chase Manhattan lost 88 cents to $45.50 and Merrill Lynch sank $1.25 to $52.50, but Morgan Stanley rose $1.06 to $52.63 and NationsBank gained $1.69 to $56.06.
* Shares of many industrial firms--whose fortunes are closely tied to the economy’s swings--gained on hopes that a rate cut will spur growth. Alcoa rose $1.38 to $71.75, Deere gained 56 cents to $31.75 and Ford rose 50 cents to $48.13.
* Technology shares led the blue-chip advance. IBM gained $2.94 to $133.50 as the Dow’s biggest gainer, while the Nasdaq market drew a boost from Dell Computer, up $2.75 to $66.06, and Intel, up $3 to $88.31.
Among Internet issues, Yahoo soared $5.75 to $121 and Amazon.com leaped $7.13 to $109.25.
* The impact of weaker global economic growth on U.S. corporate earnings was heightened when one of the bluest of the blue chips, Coca-Cola, issued a profit warning.
Coke, the world’s largest beverage company, forecast lower-than-expected earnings for the second half of 1998 as sales slow because of currency and economic woes in Asia, Latin America and Eastern Europe. Coke fell 50 cents to $56.19.
Among other consumer multinationals, Eastman Kodak fell $1.50 to $80.88 and Procter & Gamble slid $2 to $70.50.
In currency trading, the dollar rose against the Japanese yen and German mark.
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Market Roundup, D4
