Stocks close mixed dollar tumbles


May 21, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks closed mixed yesterday as bonds and the dollar tumbled and an important index of commodity prices reached its highest point since October 1990.

The weak dollar raised the specter of still-higher interest rates to prop up the currency, traders said.

"The dollar is putting a damper on everything," said Steven Zenker, portfolio manager at McCabe Capital Managers in King of Prussia, Pa., which manages $100 million in assets.

The Dow Jones industrial average rose 7.37, to 3,766.35, driven by a computer-guided program to buy stocks in the last half hour.

The average gained 106.67 points in the week, ending at its highest level since late March.

The Standard & Poor's 500 index dropped 1.56, to 454.92. Telephone, electrical equipment, bank, retail and food stocks fueled the decline.

The Nasdaq combined composite index fell 0.61, to 726.70, paced by losses in Cisco Systems Inc., Microsoft Inc., Intel Corp., Amgen Inc. and Apple Computer Inc.

More than 11 stocks dropped for every 10 that rose on the New York Stock Exchange, where volume fell to 293.3 million shares from 303.6 million Thursday.

Yields on the benchmark 30-year government bond rose to 7.30 percent from 7.23 percent Thursday, the first rise in more than a week, as the dollar tumbled 1.07 pfennigs against the German mark, to 1.6470 marks, and 0.08 yen, to 104.25.

A weak dollar "means demand for U.S. dollar-denominated securities will be less," Mr. Zenker said. "That undermines the whole problem, and there may be more pressure on the Fed to raise rates to prop the dollar up."

Higher rates would slow the economy and make bonds relatively more attractive than stocks, which are considered riskier investments.

Meanwhile, surging commodity prices heightened concern that inflation will accelerate. Texas oil for delivery in July climbed 31 cents a barrel, to $18.21 a barrel; gold for delivery in June rallied $4.50 an ounce, to $386.30; and the Commodity Research Bureau index of 21 key prices gained 1.26, to 233.69.

This week's rate increase by the Fed was expected to stabilize Treasury bonds by showing the central bank's resolve to fight inflation, but the weak dollar is scrambling that equation, analysts said. Among individual stocks, McCormick & Co. fell $1.25, to $21.50.

Philip Morris Cos., Chevron Corp. and Sears, Roebuck & Co. were the largest gainers in the Dow industrials.

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