Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.invest From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: invest Wed, Mar 11 1992 Date: Wed, 11 Mar 92 05:46:04 EST Message-ID: 03-11 0000 DECISIONLINE: Personal Investing USA TODAY Update March 11, 1992 Source: USA TODAY:Gannett National Information Network STOCKS EXPECTED TO FALL: The stock market is getting another warning - the gap between stock prices and consumer confidence. Gail Fosler of the Conference Board says they tend to be out of synch during recession. The gap narrows when recovery starts as confidence surges, catching up to stalled stock prices, which rise once a rebound is apparent. Fosler says she expects the gap to narrow, but this time stocks will fall. JUNK-BOND FUNDS ON RISE Low interest rates on savings and soaring junk-bond prices have investors pouring money into junk-bond mutual funds. And now that the recession seems to be ending, the funds may be less risky. After collapsing in 1990, the high-risk, low-rated and unrated corporate bonds had a tremendous run last year. The average fund gained 36%, including interest and price appreciation. (For more, see special Funds package below.) DOW ENDS LOSING STREAK: Stocks bounced back smartly Tuesday, recovering a portion of losses suffered the past four trading sessions. The Dow Jones industrial average gained 15.87 points to 3230.99. Small stocks were even stronger. On the New York Stock Exchange, rising stocks outpaced losers 1,076 to 630. Volume was strong at 203 million shares, up from Monday's 161 million shares. PARTNERING SPARKING DEALS: "Strategic partnering" has deals cropping up with greater frequency these days. Tuesday, brokerage Stifel Financial jumped 2 7:8 to $10 3:8 after it agreed to be bought for about $40 million in stock by Raymond James Financial, which slid 3:8 to $25 1:2. Porter Bibb of Ladenburg, Thalmann, says deals are likely to continue. "Companies can't afford not to look" for partners. OPTICAL RADIATION RISES ON DEAL: Other deals moving stocks Tuesday included optical-systems maker Optical Radiation's agreement to buy Corneal Contouring for $10 million plus royalties. Optical climbed 3 1:2 to $28. Drug wholesaler FoxMeyer rose 1 1:8 to $14 1:2 after USA TODAY columnist Dan Dorfman said on CNBC that the company was in exploratory talks to be bought by Ivax, which edged up 7:8 to $34 3:4. FIGHT OVER PATENT MOVES STOCKS: Johnson & Johnson stock dropped 1 3:8 to $96 3:8 after U.S. Surgical filed a lawsuit alleging patent infringement by the New Jersey maker of health-care products. U.S. Surgical stock inched up 1:4 to $107. U.S. Surgical of Norwalk, Conn., is seeking unspecified damages for alleged infringement on patents that cover its endoscopic clip applier, used in gall-bladder surgery. EXXON EASIER TO INVEST IN: Exxon Tuesday launched its Shareholder Investment Program, which makes it easier for small investors to buy shares of the oil giant. The key feature: Investors can start with as little as $250 and bypass a stockbroker. Experts cheered the plan. "I think Exxon's program sounds like a good one," says Vita Nelson, editor of The Money Paper. Exxon stock closed at $55 3:8 Tuesday. PARAMOUNT OPTION PLAN PASSES: Shareholders tried to suspend Paramount Communications' stock-option plan for executives at the company's annual meeting Tuesday. In an unusual move, Chairman Martin Davis allowed a voice vote that would have put off issuance of 5.75 million shares to be awarded to execs in the future. Davis declared the motion to suspend the stock plan defeated. The plan passed with 90.5% of shares favoring it. SPECIAL PACKAGE ON FUNDS: FUNDS UP THE PAST 12 MONTHS: Last year's junk-bond fund gains are a sharp turnaround from 1990, when the average fund fell 11.1% - that includes the 16.3% interest the funds paid. Despite the risks, investors have jumped at the chance to earn the higher yields, switching from stock funds and certificates of deposit, fund managers say. Junk-bond funds have paid an average interest yield of 11.1% the past 12 months. FUNDS OUTGAIN OTHER INVESTMENTS: Investors have poured $1.6 billion into the funds this year, estimates Varkki Chacko, vice president of research at Salomon Bros. Total assets were $26 billion at the end of last year. For performance, the average fund gained 6.4% this year through February, vs. 2.8% for stock funds and a loss of 1.3% for government-bond funds. IMPROVED ECONOMY BOOSTS BONDS: As the economy improves, junk bonds look safer. There's less likelihood of a company failing and defaulting on its bonds. True, when the economy improves, interest rates generally rise, causing prices of most types of bonds to fall - but not necessarily junk-bond prices. Because the key risk is default, junk-bond prices tend to rise when the economy is expected to improve. THERE'S STILL RISK INVOLVED: Although the near-term outlook for junk bonds looks tranquil, the funds are "no less risky than before," says Neal Litvack, a senior vice president at Fidelity Investments. "They're for sophisticated investors who know what they're doing." "On a purely buy-and-hold basis, there's a tremendous amount of risk," says Charlie Hooper, editor of Mutual Fund Strategies. (End of package.) DOW JONES OPENS ON UPSWING: The Dow Jones average of 30 industrials opens Wednesday at 3230.99 after closing up 15.87 points Tuesday. The New York Stock Exchange composite opens at 225.02, up 0.87. The American Stock Exchange market value opens at 408.54, up 1.33. The NASDAQ OTC composite opens at 623.46, up 7.64. DOLLAR OPENS MOSTLY UP: The dollar opens mixed on Wednesday. It opens at 0.5830 British pounds, up from 0.5807; 5.6470 French francs, down from 5.6665; 1.6725 German marks, up from 1.6635; and 132.92 Japanese yen, up from 131.90. (As of 3 p.m. Tuesday. Source: First American Bank of New York.) 24-HOUR TELEPHONE INFORMATION: USA TODAY Money Hot Line. 95 cents a minute. 1-900-555-5555. Personal Investing Editor: William Snoddy. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution 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