Dollar Stabilizes After Monday’s Slide; Stocks Gain
The dollar stabilized Tuesday after tumbling Monday, and that allowed stock and bond markets to catch their breath.
On Wall Street, buyers returned to some of this year’s favorite stocks, including Internet-related shares. The technology-dominated Nasdaq composite index rose 27.10 points, or 1.5%, to 1,901.72, recouping most of Monday’s 31-point drop.
The Dow Jones industrial average rose 40.63 points, or 0.4%, to 9,576.04, after slumping 109.41 points Monday.
Financial markets were rattled Monday after the Group of 7 leading industrial nations last weekend indicated they were shifting their policy on currency values, apparently to allow for a weaker dollar.
Analysts say the Bush administration is hoping that market forces will pull the dollar down, which could make U.S. exports less expensive abroad and bolster the nation’s struggling manufacturing sector.
But the prospect of a further sell-off in the dollar -- which already has weakened significantly this year -- raised concerns Monday that foreign investors might stop buying U.S. bonds, which could drive interest rates higher.
On Tuesday, however, the dollar mostly held steady, helped by comments from Japanese officials that suggested Japan wouldn’t allow the yen to strengthen dramatically.
Vice Finance Minister for International Affairs Zembei Mizoguchi said Japan “will take appropriate action” when needed to hold down the yen, Bloomberg News reported.
The G-7 decision “won’t stop the Japanese from intervening in the currency market,” said George Adell, head of research at Philadelphia-based Starboard Capital Markets Inc.
The dollar initially fell as low as 110.90 yen Tuesday, then rebounded to 112.09 in New York, slightly stronger than Monday’s 33-month low of 111.96.
The euro also eased against the dollar, to $1.147 from $1.148 Monday.
In the bond market, yields on long-term Treasury securities were flat or modestly lower after rising Monday. The 10-year T-note dipped to 4.21% from 4.22%.
One test of foreign investors’ willingness to buy bonds may come today, as the Treasury auctions $25 billion in two-year notes. The yield on existing two-year notes was 1.64% on Tuesday.
As for the stock market, many analysts said Monday’s losses reflected normal profit-taking after a strong run, rather than deep concern about the dollar.
Most major market indexes reached 52-week highs in the last two weeks as investors bet that the economy would continue to improve in 2004.
“The dollar seems to be topping everyone’s list of worries, but in the big picture, it looks like a normal course of backing and filling” for equities, said Bryan Piskorowski, market commentator at Wachovia Securities.
Rising stocks outnumbered losers Tuesday by 20 to 12 on the New York Stock Exchange and on Nasdaq.
With one week left in the third quarter, some money managers may be under pressure to “window dress” their portfolios, analysts said. That’s when managers buy stocks that have been strong performers recently, so clients see some hot names on their end-of-quarter statements.
Among Tuesday’s highlights:
* Stocks at 52-week highs in the Internet sector included Amazon.com, up $2.97 to $50.44; Yahoo, up $1.24 to $37.82; and InfoSpace, up $1.03 to $22.58.
* Tech shares in general were higher. Microsoft added 53 cents to $29.60, Adobe Systems gained $1.38 to $41.46 and Texas Instruments was up 66 cents to $24.11.
* Biotech firm Geron soared $5.23 to $14.80 on optimism about its experimental anti-cancer vaccines.
* Tyson Foods gained 95 cents to $14.25 after the company said it expected fiscal fourth-quarter profit of 35 cents to 40 cents a share, far above analysts’ estimates. Tyson cited increased demand for beef.
* Marriott International rose $2.62 to $45.12. The hotel company is “attractively valued,” Merrill Lynch told clients.
* On the downside, Verizon Communications slid $1.58 to $33.13. The largest U.S. local-telephone company said 2003 profit excluding some items would be as little as $2.56 a share. That’s less than the $2.70 to $2.80 it had previously forecast.
* Defense stocks stumbled after brokerage Smith Barney said waning public support for big defense outlays could mean the companies’ earnings will peak by 2005. The firm cut its rating on a number of the stocks to “hold.” General Dynamics slid $3.54 to $79.69, Lockheed Martin lost $1.85 to $45.97 and Northrop Grumman fell $3.53 to $87.96.
* Gold pulled back after reaching seven-year highs Monday. Near-term futures in New York dipped $1.30 to $385.90 an ounce.
