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Time Inc.’s stock, which has been trading at record levels recently, rose sharply again yesterday on continuing speculation that a suitor will emerge and disrupt the company’s planned merger with Warner Communications Inc. The shares of Time, which rose $7 last week, were up another $2.50 each yesterday, to $135. Warner’s stock closed down $1 a share, at $50.75.
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Reuters
Full text: [New York Times] May 31, 1989
“It wasn’t a good bet, it isn’t a good bet and it’s not going to be a good bet in the fall that a recession is about to occur,” economist James Annable of First National Bank of Chicago said in anticipation of today’s report. Other indicators making positive contributions were rising building permits; a longer average workweek; higher stock prices; a decrease in initial claims for jobless benefits; slower vendor deliveries, signaling stronger demand; a gain in orders for new plants and equipment, and an increase in manufacturers’ unfilled orders. Robert Dederick, chief economist for Northern Trust Co. in Chicago, has been forecasting a mild recession by year’s end but now concedes, “The odds are by no means convincing, even to me.
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Full text: [Los Angeles Times (pre-1997 Fulltext)] May 31, 1989
“It wasn’t a good bet, it isn’t a good bet, and it’s not going to be a good bet in the fall that a recession is about to occur,” economist James Annable of First National Bank of Chicago said in anticipation of today’s report. In April, eight of the 11 forward-looking business statistics that make up the composite index pointed upward, led by an increase in manufacturers’ orders for consumer goods. Other indicators making positive contributions: rising building permits, a longer average work week, higher stock prices, a decrease in initial claims for jobless benefits, slower vendor deliveries, which signal stronger demand, a gain in orders for new plants and equipment, and an increase in manufacturers’ unfilled orders.
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Full text: [Houston Chronicle (pre-1997 Fulltext)] May 31, 1989
Stock prices slumped in late trading Tuesday as concerns about rising foreign interest rates and their implications for the dollar triggered heavy selling. The Dow Jones industrial average ended down 18.22 points to 2475.55 after fluctuating throughout the session. At one point, it was down nearly 35 points. Pressure grew for a selloff after the market failed to hold the 2500 mark on the Dow on an early rally attempt. Traders said investors have been expecting a correction after the market’s 250-point spring rally, amid complaints the market is “overbought.” Stocks began easing off their highs as computer-directed selling hit the market.
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Chicago Tribune wires.
Full text: [Chicago Tribune (pre-1997 Fulltext)] May 31, 1989
Ending May with another choppy session influenced by futures-related program trading, the Dow Jones Industrial Average crept ahead 4.60 to 2480.15. The entire advance in the 30-stock average was due to gains of more than a point each in International Business Machines, Westinghouse Electric and Philip Morris. For the month, the industrial average rose 61.34, or 2.5% — adding to its more than 400-point rally since November. But indexes of the broader market outperformed the Dow. Among them, Standard & Poor’s 500-stock index rose 3.5% in May, the New York Stock Exchange composite added 3.3% and the Nasdaq over-the-counter composite rose 4.4%. At midday the Dow was up about 15 points, as program buying tied to stock-index futures activity yanked stock prices upward. But the trend quickly reversed near the close as traders bought futures and sold baskets of stocks. Some 51,000 June S&P 500 futures contracts were traded on the Chicago Mercantile Exchange, making it one of the busiest stock-index futures sessions this year.
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By William Power and Craig Smith
Full text: [Wall Street Journal] Jun 1, 1989
Small investors warmed to stock mutual funds in April but they gave the cold shoulder to junk. Heartened by rising stock prices, investors poured a net total of $778.4 million into stock funds for the month, the Investment Company Institute, a Washington trade group, said. That was more than triple the March inflow of $232.9 million, and five times the year-earlier $132 million. But for high-yield junk bond funds, one of last year’s most popular and best performing fund categories, sales shrank suddenly to a trickle in April. Net sales — or sales minus redemptions — were the weakest since Black October saw investors yank out $281 million.
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By Michael Siconolfi
Full text: [Wall Street Journal] Jun 1, 1989
The government’s primary economic forecasting gauge turned up 0.8% in April after two months of decline, the Commerce Department said. In a separate report, the department said orders for goods from U.S. factories climbed 2.7% during the month, to $239.36 billion, their strongest showing since December. All the figures are adjusted for seasonal changes. The index of leading indicators — a composite of 11 measures of economic activity designed to foreshadow the economy’s state several months hence — showed wide-ranging health. Eight of the components — including stock prices, building permits and capital spending orders — contributed to the index’s advance. Only three pulled it down: a drop in consumer confidence, a contraction of the money supply and falling prices for certain raw materials, indicating slower demand. Over a year ago the Federal Reserve set out to slow the economy by raising interest rates to relieve inflationary pressures. A slew of economic reports for February and March had suggested the economy was finally softening. And last week the government sharply revised its estimate of the economy’s growth in the first quarter to show a far slower pace than it originally calculated.
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By Hilary Stout
Full text: [Wall Street Journal] Jun 1, 1989
Interest is growing in artificial intelligence (AI) and expert systems due to business needs that will result from the unification of the European financial markets, banking’s entry into the trading arena, and the need for data in a multicurrency, multilingual international environment. An expert system contains: 1. an expert domain containing an expert’s knowledge and decision-making rules, 2. an inference engine that uses logic and problem-solving experience to infer conclusions, and 3. a knowledge base such as a database. Morgan Stanley & Co. Inc. has a system called Expert Tick that is used on the profit and loss desk. Thomas Martin of Arthur D. Little says that, while most Wall Street firms are using some sort of expert system, most of them are in fixed-income areas and have little to do with actual trading. Expert systems are used for stock price monitoring and for analytics within software applications. Insurance companies use expert systems for loan, risk, and credit management applications.
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Francis, Ted
Full text: [Wall Street Computer Review] Jun 1989
The effect of an introduction of option on individual securities is examined for the period 1974-1980. Using an event study methodology around the date of option introduction and announcement of introduction on the American Option Exchange and the Chicago Board of Options Exchange, it is found that introduction, and not announcement, causes a permanent price increase. Both the size and timing of the price effect are constant through the 6 years studied. The price effect is accompanied by a fall in volatility. The systematic risk of securities is not affected by the option introduction. The price increase is positively related to the option’s opening day trading volume. This fact and the timing of the price effect, beginning about 3 days before the introduction, suggests that dealers or other traders are building inventory for hedging purposes in anticipation of the trading volume in the option.
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Conrad, Jennifer
Full text: [The Journal of Finance] Jun 1989
The efficiency of stock price adjustment due to antitrust litigation involving Section 2 of the Sherman Act was examined. It was hypothesized that, when a firm is found guilty of a violation, there will be a redistribution of market power to other firms at its expense and vice versa if the finding is reversed. These theories were tested using data for 46 firms that were involved in antitrust cases from 1962 through 1986, as well as the Telex versus IBM Section 2 case. The results indicated that shareholders of firms involved in the litigation experienced decreases (increases) in return when either court finding was unfavorable (favorable). The Telex versus IBM results indicated that the district court’s finding against IBM resulted in significant positive abnormal returns for computer industry firms. Abnormal negative returns were also found in the period surrounding the appellate court reversal.
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Huth, William L.
MacDonald, Don N.
Full text: [The Journal of Industrial Economics] Jun 1989
A recent extension of the capital asset pricing model by Merton (1987) proposed that asset returns are an increasing function of their beta risk, residual risk, and size and a decreasing function of the public availability of information about them. Associating the latter with asset liquidity and following Amihud and Mendelson’s (1986) proposition that asset returns increase with their illiquidity (measured by the bid-ask spread), a joint test is carried out of the effects of these 4 factors on stock returns. The return data are obtained from the University of Chicago Center for Research in Security Prices files. The percentage bid-ask spread was computed from data in Fitch’s Stock Quotations on the NYSE, giving one spread observation per stock for each of the years 1960-1979. The results support the hypotheses that expected return is an increasing function of beta and of the bid-ask spread but do not support the hypotheses on the effects of residual risk and firm size.
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Amihud, Yakov
Mendelson, Haim
Full text: [The Journal of Finance] Jun 1989
A recent extension of the capital asset pricing model by Merton (1987) proposed that asset returns are an increasing function of their beta risk, residual risk, and size and a decreasing function of the public availability of information about them. Associating the latter with asset liquidity and following Amihud and Mendelson’s (1986) proposition that asset returns increase with their illiquidity (measured by the bid-ask spread), a joint test is carried out of the effects of these 4 factors on stock returns. The return data are obtained from the University of Chicago Center for Research in Security Prices files. The percentage bid-ask spread was computed from data in Fitch’s Stock Quotations on the NYSE, giving one spread observation per stock for each of the years 1960-1979. The results support the hypotheses that expected return is an increasing function of beta and of the bid-ask spread but do not support the hypotheses on the effects of residual risk and firm size.
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Amihud, Yakov
Mendelson, Haim
Full text: [The Journal of Finance] Jun 1989
Efficient market theory implies that equilibrium futures prices have no memory. This memoryless feature of futures prices in an efficient market can be incorpo rated into price models in a variety of ways. Perhaps the most common way is to make the Markov assumption. Indeed, Merton (1982) points out that ‘the Markov assumption is almost universal among substantive models of stock price returns.’ As a specific example, all diffusion-based models underlying option pricing formulas make the Markov assumption. The theory of efficient markets, therefore, leads to the empirically testable hypothesis that time series of futures prices are memoryless.
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David H Goldenberg
Full text: [The Journal of Futures Markets (1986-1998)] Jun 1989
The information effects caused by a firm’s change in capital structure via debt-for-equity and equity-for-debt exchange offers are empirically investigated. The analysis extends Masulis’ (1983) and Mikkelson’s (1985) cross-sectional regression analyses by including proxies for the information effects of capital structure changes. The data consist of a sample of public announcements of debt-for-equity and equity-for-debt exchange offers by firms listed on the New York Stock Exchange or on the American Stock Exchange covering the period 1973-1983. The evidence indicates that debt-for-equity transactions lead to abnormal stock price increases, while equity-for-debt transactions lead to abnormal stock price decreases. Empirical results on bond issues do not lend support to the wealth-transfer and tax-effect hypotheses, but they are consistent with the information-effect hypothesis.
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Cornett, Marcia Millon
Travlos, Nickolaos G.
Full text: [The Journal of Finance] Jun 1989
The information effects caused by a firm’s change in capital structure via debt-for-equity and equity-for-debt exchange offers are empirically investigated. The analysis extends Masulis’ (1983) and Mikkelson’s (1985) cross-sectional regression analyses by including proxies for the information effects of capital structure changes. The data consist of a sample of public announcements of debt-for-equity and equity-for-debt exchange offers by firms listed on the New York Stock Exchange or on the American Stock Exchange covering the period 1973-1983. The evidence indicates that debt-for-equity transactions lead to abnormal stock price increases, while equity-for-debt transactions lead to abnormal stock price decreases. Empirical results on bond issues do not lend support to the wealth-transfer and tax-effect hypotheses, but they are consistent with the information-effect hypothesis.
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Cornett, Marcia Millon
Travlos, Nickolaos G.
Full text: [The Journal of Finance] Jun 1989
The Dow Jones industrial average rose 4.60 points to close at 2,480.15 on May 31, 1989.
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Luke, Robert
Full text: [The Atlanta Constitution] Jun 1, 1989
Ranked by the size of their contribution, the factors that contributed to the increase were manufacturers’ new orders for consumer goods and materials, building permits, the average workweek, stock prices, weekly initial claims for state unemployment insurance, vendor performance, contracts and orders for plant and equipment, and the change in manufacturers’ unfilled orders. The index of coincident indicators edged down 0.1 percent in April while the index of lagging indicators fell 0.5 percent, thereby causing the coincident-to-lagging ratio to rise following three straight declines. Meanwhile, another Commerce Department report yesterday also pointed to an early spring pickup in the economy as new orders for nondurable manufactured goods advanced a surprisingly hefty 2.4 percent in April, while the total gain for all kinds of manufactured goods rose 2.7 percent.
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Full text: [Star Tribune] Jun 1, 1989
The slump in military orders has hurt Hexcel’s stock price. While many aerospace contractors have seen their shares jump 20 percent or more this year, Hexcel’s stock price has sunk nearly 25 percent from its 52-week-high of 43, reached last October. It closed yesterday at 33. One reason Hexcel stands to rebound from its slump is that new aircraft – whether military or commercial – are using larger amounts of its materials. Each Boeing 757 uses about $500,000 worth of Hexcel material, compared with just $50,000 for the older-model 727. Specialty chemicals account for another 9 percent of Hexcel’s revenues. Various Hexcel plastics and resins are used in pharmaceuticals, cosmetics and even food additives. Included is the chemical that makes the fizz in Alka Seltzer, suppresses coughs in Vicks Formula 44 and improves breath in Scope mouthwash.
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Jeff Pelline, Chronicle Staff Writer
Full text: [San Francisco Chronicle (pre-1997 Fulltext)] Jun 1, 1989
Washington The Index of Leading Indicators, the government’s main barometer of future economic trends, rose 0.8 percent in April after two consecutive monthly declines, the Commerce Department said yesterday. Other components that contributed to the increase were gains in the number of building permits, the average workweek, stock prices and manufacturers’ unfilled orders, as well as a drop in initial claims for unemployment benefits and an increase in reports of delayed deliveries from suppliers. The economy is widely expected to resume its sluggish trend, with a few economists even predicting a recession, largely because of the interest rate increases engineered by the Federal Reserve Board over the past year to curb inflation.
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Full text: [San Francisco Chronicle (pre-1997 Fulltext)] Jun 1, 1989
The stock price of toy industry giant Hasbro Inc. of Pawtucket jumped again yesterday in heavy trading, one day after Hasbro announced that its chairman and chief executive officer, Stephen D. Hassenfeld, was hospitalized for treatment of pneumonia and is in intensive care. Hasbro stock closed yesterday at $21.50, up 87.5 cents in composite American Stock Exchange trading, after gaining $1.25 per share Tuesday. About 1.1 million shares changed hands yesterday, more than double the volume of any other stock traded on the Amex. (excerpt)
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Downing, Neil
Full text: [Providence Journal] Jun 01, 1989