Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!americast.com!usa-post Newsgroups: usa-today.banks From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: banks Mon, Jul 6 1992 Date: Mon, 6 Jul 92 05:14:18 EDT Message-ID: 07-06 0000 DECISIONLINE: Banking & Economy USA TODAY Update July 6, 1992 Source: USA TODAY:Gannett National Information Network INVESTORS UNIMPRESSED WITH CUT: Now that the Federal Reserve has cut interest rates, the question is whether lower rates matter to stock investors anymore. For 18 months, a continuing drop in interest rates had been everything to the stock market - the driving force behind the 700-point rise in the Dow Jones industrial average since the end of 1990. This time, investors appear unimpressed. (For more, see special Cut package below.) MARKETS REOPEN: U.S. financial markets were closed Friday for Independence Day. Markets reopen Monday. Thursday: The Dow Jones industrial average fell 23.81 points to 3330.29 but still managed a gain of 47.88 points for the week. The NASDAQ composite index fell 5.64 points to 563.35. BRADY SEES ECONOMIC GROWTH: Despite an unexpected jump in the unemployment rate, there should be reasonable economic growth the second quarter, Treasury Secretary Nicholas Brady said Sunday on "This Week With David Brinkley." But Brady says growth may slow from the first quarter's 2.7% pace. Thursday, the Labor Department said that the unemployment rate jumped sharply in June to 7.8% from 7.5% in May. FACTORY ORDERS DOWN: After growing modestly the previous four months, the economy lost 117,000 non-farm jobs in June. Economists had estimated 93,000 new jobs would be created last month. The jobless rate has risen a full percentage point since September. Also, the Commerce Department reported that orders to U.S. factories fell 0.8% in May to $239 billion, the first drop in five months. MORE BUSH BASHING: The Washington office of Prudential Securities is telling money managers President Bush is likely to only serve one term because of his inability to articulate how he'd get the economy going again, analyst Ethan Siegal says. He figures stocks are in hot water if rivals Ross Perot or Bill Clinton win. Both, he says, would be fiscal spenders to create more jobs - an inflationary spark. MONEY MARKET MUTUAL FUNDS LOW: Money market mutual funds are the lowest since the funds were created in 1973. The annualized percent yield for 1992 was 3.51% in May, according to IBC:Donoghue's Money Fund Report. That's down from 5.71% in 1991 and a decade peak of 12.23% back in 1982. The closest the funds have come to that 3.51% was in 1977, when the average yield was 4.98%. STOCK MARKET MUTUALS GRAB MONEY: Despite the woeful performance of stock market mutual funds so far this year, investors keep pouring money into them at record rates. Since December, stock funds have attracted about $7 billion per month in new investment, up from an average $3.2 billion the previous six months. Interviews with investors reveals that they're heeding advisers' words to buy diversified stock held for decades. MONEY MARKET MUTUAL FUNDS LOW: Money market mutual funds are the lowest since the funds were created in 1973. The annualized percent yield for 1992 was 3.51% in May, according to IBC:Donoghue's Money Fund Report. That's down from 5.71% in 1991 and a decade peak of 12.23% back in 1982. The closest the funds have come to that 3.51% was in 1977, when the average yield was 4.98%. SPECIAL PACKAGE ON CUT: TRADERS SOLD ON THE NEWS: The Federal Reserve Board's cut in the discount rate to 3% from 3.5% didn't impress investors. After an initial 20-point rally Thursday, the Dow tumbled and ended the day down 24 points at 3330. Some market analysts made light of the bad reaction to the rate cut. They say the cut was expected and traders who had bought stocks in anticipation sold on the news. EARNINGS THE NEXT ISSUE: Some market analysts warn that the initial bad reaction to Thursday's rate cut could be the start of something more serious. "We've done about as much as we're going to do with lower interest rates," says Art Micheletti, market strategist at Bailard, Biehl & Kaiser. "The issue now is going to be corporate earnings reports." CUTS HAVEN'T HELPED EARNINGS: Investors cheered past interest-rate cuts, believing lower rates would strengthen the economy and lead to higher corporate earnings. So far, though, rate cuts haven't brought the hoped-for earnings rebound. "High interest rates didn't get us into the recession, and lower rates aren't going to get us out," says Charles LaLoggia of Special Situations Report investment newsletter. SAVINGS YIELDS SEEN FALLING: William Dodge, strategist at Dean Witter Reynolds, believes Thursday's rate cut will push yields on savings even lower and force more savers out of certificates of deposit and money market funds. Some of that cash will find its way to stocks. But the main beneficiary will be long-term bonds. Thursday, yields on 30-year Treasury bonds rose to 7.63% from 7.74%. (End of package.) DOW JONES OPENS ON DOWNSWING: The Dow Jones average of 30 industrials opens Monday at 3330.29 after closing down 23.81 Thursday. Markets were closed Friday for the July Fourth holiday. The New York Stock Exchange composite opens at 226.41, down 0.34. The American Stock Exchange market value opens at 382.55, down 0.46. The NASDAQ OTC composite opens at 563.35, down 5.64. 24-HOUR TELEPHONE INFORMATION: USA TODAY Money Hot Line. 95 cents a minute. 1-900-555-5555. Banking & Economy Editor: William Snoddy. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution purposes violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM