Dow whipsawed; dollar sinks Is it the euro or the yo-yo?
Stocks gyrated wildly on the day of the euro’s debut in trading. Most European markets scored big gains – but the U.S. markets were decidedly mixed.
The Dow Jones industrial average opened strong – up as much as 166 points – before petering out. Blue chips ended the day with a gain of 2.84 to 9,184.27, after falling into negative territory.
The S&P 500 fell 1.13 to 1,228.1, and the technology-laden Nasdaq composite gained 15.35 to 2,208.04.
The euro is the new currency that unites 11 European nations. One major holdout is Britain.
Italy’s Milan 30 index was the world’s best performing yesterday, rising a stunning 6.44 percent. France, Germany and Spain also posted gains of better than 5 percent yesterday.
“Investors are showing that they believe the euro will be a positive for Europe,” said Luke Mazur, chief investment officer at Pacific Alliance Capital Management, who noted that equity markets for European countries that are not participating in the roll-out of the euro did not turn in a good performance at all yesterday.
Great Britain’s FTSE-100 index, for example, turned down on the first day of trading in the new year. Great Britain has been a noted hold-out from the euro, preferring to keep its currency, the pound.
But Great Britain may eventually join the euro countries, predicted Mazur.
“The Euro could be a threat to the U.S. dollar,” said Richard Schmidt, editor of Stellar Stock Report, a popular investment newsletter. “And we’ve had a tremendous market run in the U.S. for the last few years so it’s getting harder to get the big one-day spikes.”
The most-traded stocks yesterday included MBNA Corp., down 13/16 to 24; Worldcom/MCI, down 1 to 69; and Bell Atlantic, down 21/16 to 5115/16.
DuPont Co. rose 23/16 to 551/4 as some investors bet it would find a move lucrative acquisition after dropping its $750 million purchase of Imperial Chemicals Industries PLC’s white pigment business.
The big technology sector winners of the day were Microsoft, up 25/16 to 141; Intel, up 21/4 to 12013/16; and Dell, up 1 to 743/16.
“The U.S. economy continues to dominate in things like technology,” said Mazur. “But the Europeans have to be watched.”
The euro rose against the dollar yesterday as the creation of a $10 trillion market in stocks and bonds denominated in euros fueled demand for the single European currency on its first day of trading.
The euro rose to $1.183 yesterday, up from its initial rate of $1.16675, set by European Union finance ministers.
The dollar fell to 111.88 yen from 113.9 yen on Thursday when currency trading halted for the New Year’s holiday.
U.S. bonds slumped as investors turned their interest overseas.
“This was not unexpected,” said Rosemary Sagar, managing director and head of U.S. Trust’s Global Investment division. “You will see some shift in demand to euro-denominated government securities from U.S. government securities, as countries seek to diversify their reserves. This could gradually lead to somewhat higher U.S. rates than would have otherwise existed, while putting downward pressure on European rates.”
The yield on the benchmark 30-year Treasury bond, which moves in the opposite direction from price, went up 5 basis points to 5.14 percent.