Stocks close mixed Dow climbs 9

February 15, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks closed mixed yesterday as a rally in automakers' shares was offset by concern that a falling dollar would lead to higher inflation.

The Dow Jones industrial average closed 9.28 higher, at 3,904.06, after losing as much as 20 points, or 0.5 percent, from a midday high of 3,920.67.

The dollar plunged to a six-month low against the Japanese yen yesterday, down 5.15 yen, at 102.1, suffering its worst one-day drop since Sept. 21, 1985.

The dollar has lost 5 percent of its value against the yen since late Thursday amid concerns the Clinton administration will resume calls for a strong yen in light of Friday's collapsed trade talks with Japan.

"A weaker dollar is a way of importing inflation," said Todd Clark, senior trader at Mabon Securities Inc.

"In other words, it takes more dollars to buy foreign products."

The United States, which wants Japan to open its markets to more foreign goods, pulled out of the trade talks. President Clinton said he was mulling trade sanctions against Japan. In Japan, the Nikkei 225 Index fell 2.66 percent, to 19,459.25.

The S&P 500 Index rose as much as 1.81, to 471.99, before slipping 0.05, to close at 470.23. The index closed Friday at 470.18.

The Nasdaq Composite Index gained 4.06, to 785.45. The index was lifted by shares of Oracle Systems Corp., which rose $1, to $32.75, and Snapple Beverage Corp, which rose $1.50, to $31.25. The American Stock Exchange's Market Value Index slipped 2.32, to 474.91.

The number of common stocks that rose narrowly outpaced the number that fell on the New York Stock Exchange. Trading was '' active, with about 263 million shares trading hands.

Automakers rebounded after taking a beating last week, lifting the Standard & Poor's Auto Index 2.50 higher, at 273.29. The index slipped 6 percent last week.

General Motors Corp. rose 50 cents, to $61.625; Ford Motor Co. gained 25 cents, to $65.75; and Chrysler Corp. rose 75 cents, to $59.75.

The automakers' shares were boosted by a report from CNW/Marketing Research that said car sales in the 10 days that ended Feb. 10 reached an annual selling rate of 6.7 million, while trucks sold at a 5.5 million pace.

A falling dollar is bad for stocks because it discourages foreign investors from owning U.S. stocks or bonds. A weak dollar reduces the returns on U.S. dollar-denominated investments.

While some would argue that a weak dollar may help U.S. companies by spurring demand for their goods abroad, the economies in Europe or Japan may be too depressed for the weak dollar to have much effect. As a result, American manufacturers might lose more than they would gain from a weak U.S. currency.

A declining dollar also fuels concern about inflation because it means foreign goods cost more in the United States, traders said. Inflation causes interest rates to rise, making fixed-income investments more attractive relative to stocks.

"If interest rates continue to go up, people are going to sell stocks to lock in yields," Barry Berman, head trader at Robert W. Baird, said. "We're not there yet, but it could happen" if the weakness in the dollar persists.

The yield on the benchmark 30-year Treasury bond closed at 6.44 percent yesterday.

Last week the yield rose to 6.47 percent, the highest level since last Aug. 9, 1993.

Shares of QVC Network Inc. rose $1.625, to $48.50. The home-shopping network, in a bidding war to acquire Paramount Communications Inc., was raised to "attractive" from "neutral" yesterday by PaineWebber Inc. analyst Craig Bibb.

Columbia HCA Healthcare Corp. rose $1.125, to $39.75.

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