Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!americast.com!usa-post Newsgroups: usa-today.invest From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: invest Tue, May 12 1992 Date: Tue, 12 May 92 05:10:23 EDT Message-ID: 05-12 0000 DECISIONLINE: Personal Investing USA TODAY Update May 12, 1992 Source: USA TODAY:Gannett National Information Network SPLITS COULD SHAKE UP DOW: The Dow Jones industrial average could become more volatile with the split of four Dow stocks in coming weeks. Tuesday, the stock of Coca-Cola splits two-for-one. Friday, Procter & Gamble will split two-for-one. Walt Disney will split four-for-one Monday, and Merck will split three-for-one May 26. In each case, the stock price will fall to account for the extra shares outstanding. (For more, see special Split package below.) DOW HITS NEW HIGH: Hopes for lower interest rates sent blue-chip stocks to a new high Monday. The Dow Jones industrial average rose 28.17 points to a record 3397.58. Broader indexes were slightly higher. Volume was light ahead of government reports Tuesday and Wednesday on April inflation. Wary traders say they hope low inflation figures will spur the Federal Reserve to push rates lower. ESTIMATES MAY BE MOVING STOCKS: Stocks' movement higher may also be attributed to a recent trend of analysts raising their estimates of corporate earnings. "There's a window of opportunity here," says Steven Resnick, strategist at Cowen & Co. "Earnings are getting better - skyrocketing is really the word. And the interest-rate situation is, at worst, neutral." BANK STOCKS UP ON MERGER TALK: First Interstate and Wells Fargo shares surged on new speculation that the oft-rumored merger partners finally will team up. Los Angeles-based First Interstate was up 2 1:2 at $44 3:8. Wells Fargo gained 4 5:8 to $86 3:8. Neither company would comment. Wells stock may also have been boosted by a report in Barron's that respected investor Warren Buffett is still bullish on Wells. GM HUGHES TO BUY MISSILE BIZ: General Motors Hughes Aircraft agreed Monday to buy General Dynamics missile business in a deal that will give General Dynamics stock worth at least $450 million. GM Hughes will give 21.5 million shares of its GM-H stock to General Dynamics, then manage a sale of that stock to the public. At $22 3:4 Monday, the GM-H shares would net $489 million. General Dynamics shares inched up 1:8 to $66 1:4. WAL-MART GROWTH TO CONTINUE: Wal-Mart shares rose 7:8 to 52 7:8 Monday after the USA's largest retailer said its first-quarter earnings jumped 26%, results analysts expect to continue. Wal-Mart's net income rose to $387 million, or 34 cents a share the quarter ended April 30, from $307 million, or 27 cents a share, a year earlier. Revenue rose to a record $11.6 billion from $9.3 billion a year earlier. HOME DEPOT CALLED BEST BET: Home Depot added 1 1:2 to $65 3:4 after Prudential named the firm as the best investment among retail stocks. Other retailers edged up on positive earnings: May Department Stores added 3:8 to $55 7:8 after it reported first-quarter earnings of 61 cents a share, up from 58 cents last year. Sears gained 1 1:8 to $43 3:4. RATES DOWN AT TREASURY AUCTION: The Treasury Department sold $11.6 billion in three-month bills at an average discount rate of 3.64%, down from 3.65% last week. It also sold $11.7 billion in six-month bills at an average discount rate of 3.74% vs. 3.78% last week. GOLD, SILVER RISE: Gold prices were mostly mixed Monday. On the New York Commodity Exchange, gold bullion for current delivery settled at $336.70 a troy ounce, up 70 cents from Friday. Republic National Bank said gold rose 90 cents an ounce to a late bid price of $336.30. Gold fell in London. Silver prices were slightly higher. On the Comex, silver bullion settled at $4.092 an ounce, up from $4.077. SPECIAL PACKAGE ON SPLIT: PRICE CHANGES A PROBLEM: When Coke splits its stock, it will double its shares, so the stock price, $85 3:8 Monday, will fall initially to about $42 3:4. Such sharp reductions would push the Dow average immediately lower -without a trade being made - if the arithmetic used to compute the Dow is not rejiggered. So the divisor used in the calculation, 0.559 before the splits, will fall to about 0.468, says Dow Jones. SHARP SWINGS TO BECOME COMMON: The divisor is adjusted with each significant change in the Dow, such as a stock split. With the divisor dropping below 0.5 for the first time, the practical effect will be that the Dow will move more than 2 points for each 1-point change in a single component stock. That suggests that the occasionally sharp swings of the Dow average could grow more frequent. (End of package.) DOW JONES OPENS ON UPSWING: The Dow Jones average of 30 industrials opens Tuesday at 3397.58 after closing up 28.17 points Monday. The New York Stock Exchange composite opens at 230.47, up 1.27. The American Stock Exchange market value opens at 395.84, up 1.72. The NASDAQ OTC composite opens at 587.13, up 1.37. DOLLAR OPENS DOWN OVERSEAS: The dollar opens down on Tuesday. It opens at 0.5577 British pounds, down from 0.5599; 5.5125 French francs, down from 5.5320; 1.6403 German marks, down from 1.6445; and 133.04 Japanese yen, down from 133.37. (As of 3 p.m. Monday. 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. 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