Gorbachev's return is coup for Wall St. and futures markets Dow Jones index leaps 88.10 points

August 22, 1991|By Thomas Easton | Thomas Easton,New York Bureau of The Sun

NEW YORK -- Euphoria swept the nation's financial and commodity markets yesterday as news of the failed Soviet coup pushed up prices of stocks, grains and sugar and depressed prices of petroleum products.

"This is bullish not only for Wall Street but the world," said Brad Weekes, a senior vice president at Donaldson Lufkin & Jenrette. "You couldn't write a book with a better ending than this one. It's been a long, wonderful day."

The Dow Jones industrial average recouped all that was lost earlier in the week on news of the coup, soaring 88.10 points to close at 3001.79. The broader New York Stock Exchange Composite Index closed at a new high of 213.89, up 5.62 for the day. Volume on the NYSE was a heavy 231.7 million shares, about 25 percent more than average.

Companies that do business with the Soviet Union registered particularly large gains, including Philip Morris, up 3 3/8 at 73 5/8 ; McDonald's, up 1 at 32; and PepsiCo, up 1 3/8 at 33.

"It's almost a complete retracement of what we witnessed the day before last," said John H. Shaughnessy, head of research at Advest Securities. "In some respects, things could be better than they were before in that we have laid the ghost of communism to rest once and for all."

While traders and analysts appeared gleeful following a session that began well and ended better, there was an underlying sense of caution that the elation might be overdone.

"If you want to talk about the long term, you have to talk about getting the Soviet economy in shape so that its people can eat," said Muriel Siebert, president of Muriel Siebert & Co. "That certainly didn't happen today, and this week's disruption had no positive impact on production."

Indeed, Mr. Shaughnessy noted that in the near future, the resumption of a democratic administration in the Soviet Union might aggravate chaos. "Let's face it," he said. "Capitalists love tyrants because their regimes are stable and typically will honor obligations. Now, with the shifting of control, there are questions of who gets what. It will be tricky."

In the commodity markets, where the Soviet Union has a tremendous impact through its vast trade in raw goods, prices were extremely volatile. In New York, prices rose almost 9 percent for sugar, of which the Soviet Union is the world's largest importer. Copper prices rose about 1 percent, despite the settlement of a strike in Chile, suggesting renewed confidence in global economic growth.

On the Chicago exchanges, wheat, corn and soybean prices all went up the maximum permitted amounts because of the evaporation of fears that exports to the Soviet Union would be curtailed. Conversely, in the petroleum markets, where the Soviet Union has a large presence through exports, prices fell across the board with the cost of heating oil, a core product, dropping 6.3 percent.

"These are humongous moves, and they are probably overdone," said James Nevler, an analyst at the Commodity Research Bureau. "The futures markets tend to overdo everything, including euphoria."

Surprisingly, the one market that remained "comatose," Mr. Nevler noted, was gold. It rose a modest 85 cents, to $356.85, after declining a little bit more earlier in the week.

"A decade ago, gold prices would have been spastic in response to these events," said Mr. Nevler. "Fifty-dollar [an ounce] moves would have been expected."

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