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Dow Up 80 as Markets Await Fed Move Today

September 29, 1998|From Times Wire Services

Blue-chip stocks rose sharply Monday, but a broad rally faltered as investors waited to see how aggressive the Federal Reserve will be in trying to heal the global economy with lower interest rates.

The Dow Jones industrial average closed up 80.07 points, or 1%, at 8,108.84 after bouncing back from a late slide that nearly wiped out an earlier gain of 130 points.

Broader indexes never fully recovered, finishing mixed before a Fed meeting today at which the central bank officials are expected to spur the economy with a cut in lending rates.

The Dow was buoyed by a pair of big stock buyback plans announced by McDonald's Corp. and American Express, as well as the planned spinoff by DuPont of its Conoco energy unit.

Because the Dow has already rebounded 700 points since bottoming out at 7,400 on Sept. 1, the stimulative potential of a rate cut may already be reflected at the market's current level, analysts cautioned.

"There's a war going on between those who think a rate cut will mean positive things for the market and those who think it's already priced into the market," said William P. Miller, chief investment officer for large-cap equities at American Express Asset Management Group in Minneapolis.

"Given that the stock market is up 10% this month so far, it's probably fair to assume that some of that good news has gone into the stock market, so some people took some profits going into the meeting," Miller said.

Last week, Fed Chairman Alan Greenspan hinted strongly that the central bank is set to act against the drag of economic crises in Asia, Russia and other regions.

Among broader indexes, the Standard & Poor's 500 rose 3.94 points to 1,048.69, but the technology-heavy Nasdaq composite index fell 4.37 points to 1,739.22 after giving up a 26-point gain.

Advancing issues outnumbered decliners by a 4-3 ratio on the New York Stock Exchange.

The NYSE composite index rose 2.35 points to 518.03. The American Stock Exchange composite index rose 0.13 point to 640.12. The Russell 2,000 index of smaller companies fell 1.01 points to 368.01.

Bond prices fell as investors anticipated any rate cut would trim demand for the safety of Treasuries after the biggest two-month rally in more than a year. The yield on the benchmark 30-year bond rose to 5.15% from 5.12% on Friday.

In currency markets, the dollar fell to 135.85 yen from 136.25 on Friday, after rising as high as 136.89 earlier on news that Japan's second-largest leasing company went bankrupt. The dollar fell against the German mark, though it was still up almost 1% from the 19-month low it hit Friday.

Among Monday's highlights:

* McDonald's rose $2.63 to $59.88 after the fast-food giant said it will buy back $3.5 billion of its common stock in a repurchase plan 75% larger than the one it completed last month.

* American Express shares rose $2.50 to $83 after its board approved a stock buyback of up to 40 million additional shares over the next two to three years, representing about 9% of its common shares.

* Procter & Gamble rose $3.13 to $73.63, DuPont rose $2.88 to 61.63 and 3M rose $2.81 to $77.13 to lead the Dow, which is now about 200 points above 1998's starting point, but still more than 1,200 points below the July 17 peak of 9,337.97.

* Agouron Pharmaceuticals rose $1.88 to $34.25 after the biotechnology company said it could begin testing an experimental drug to help people fight the common cold.

Overseas, Tokyo's Nikkei 225-stock average rose 1.4% following an agreement between the ruling party and the major opposition parties on a key set of bills to clean up Japan's troubled financial system. Frankfurt's DAX index rose 2%, and London's FTSE-100 rose 0.6%.

Market Roundup, D14

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