Financial markets Monday were not inspired by the opening of the Republican National Convention or anything else.
The Dow Jones industrial average closed down 4.05 points at 3324.89 on the New York Stock Exchange, but advancing issues outnumbered losers 968-767 among stocks listed on the exchange. The broader Standard & Poor`s 500 index registered a gain. Big Board volume was moderate at 152.8 million shares.
Caterpillar stock was hit on fears of continued labor unrest at the company. Caterpillar closed down $1.62 at $48.25. Bank stocks dropped after Citicorp, the nation`s largest bank, revealed that it has been under close scrutiny by federal bank regulators. Airline stocks, including UAL, parent of United Airlines, gained after a favorable analysis in Barron`s.
The bond market, still digesting last week`s $36 billion of new Treasury securities, is suffering some ”queasiness,” said Samuel Kahan, chief economist for Fuji Securities in Chicago. The 30-year Treasury bond`s price closed down, and the yield, moving opposite to price, climbed to 7.36 percent from 7.33 percent late Friday.
Long-term rates remain high, if you believe that inflation truly has been whipped. But some investors worry that the federal government will ignore inflation and the federal deficit in a rush to stimulate the economy, Kahan said. That`s why traders and analysts will listen carefully to any economic-policy statements at the GOP convention.
Japanese crisis
The presidential election is only one milestone event in world affairs this fall that could rock financial markets.
Another is the effort by the Japanese to deal with their nation`s first major financial crisis in the postwar period. Some regional banks and mortgage banks in the country are failing, and worries persist that one of Japan`s major global banks soon may require a bailout.
Japanese officials belatedly have acknowledged that they have a problem. A government policy for the crisis, which has seen Japanese stock prices plummet in the last 2 1/2 years, will emerge soon. This fall, Japanese companies will report fiscal first-half financial results, expected to show continued weakness.
If Japanese financial markets absorb calmly the government`s new fiscal policy and the earnings reports, the stage may be set for the beginning of a turnaround, said David Hale, Kemper Corp. vice president for international and economic affairs, at a seminar on Japanese asset prices Monday at the University of Chicago Graduate School of Business.
But with Japan`s largest banks and industrial firms heavily invested in one another`s stock, a calamity could escalate quickly.
California`s already troubled economy could be weakened further by more troubles at Japanese financial institutions, which are major lenders and investors in California.
Particularly unsettling is that the Japanese haven`t faced a financial crisis in the postwar era, Hale said. Additionally, Japan`s relatively secret financial accounting rules make the extent of the problem hard to gauge.
Still, several conference speakers said scare stories about Japan`s economy have been overblown.
”Now is the time to buy Japanese stocks,” declared Scott Pardee, chairman of Yamaichi International, the U.S. arm of the giant Japanese investment firm Yamaichi Securities. He expects Japanese stocks to outperform U.S. stocks significantly over the next several years.
Why? For one thing, despite what you read about the new generation of Japanese workers demanding more and producing less, ”The Puritan work ethic is alive and well in Japan,” Pardee said.
Alden IPO priced
Stock of Alden Press, an Elk Grove Village-based supplier to the direct-marketing industry, was priced in an initial public offering Monday at $9, far less than the $11.50 to $13.50 the company initially indicated. The company, which last month postponed the offering pending fresh financial reports, sold 2.5 million shares-down from 3.2 million initially proposed-through underwriters led by William Blair and Co.
