Cautious Dow Up 7.83 Before Bush Speech : Market Overview

* Stock prices struggled to small and spotty gains in light trading as investors braced for tonight’s State of the Union address by President Bush, which is expected to tackle the stubborn recession.

* The Dow Jones average, down 32.20 points last week, rose 7.83 points to 3,240.61.

* The dollar rose sharply against other key currencies after officials of major industrial nations meeting over the weekend failed to indicate a preference on exchange rates.

Stocks

Stock market investors seemed inclined to proceed cautiously as they awaited the President’s message.

President Bush will use his annual State of the Union speech to outline proposals to stimulate the economy. Congress is also expected to lay out its own ideas for spurring a recovery.

John Robson, deputy secretary of the Treasury, asserted that Bush’s proposals would not “blow a big hole” in the federal budget.

Advancing issues slightly outnumbered declines on the New York Stock Exchange, while Big Board volume came to an estimated 190.97 million shares, against 214.55 million in the previous session.

Bush is also expected to suggest some form of tax cuts, and analysts say the programs may include a reduction in the tax on capital-investment gains.

But until the plans are fully laid out, “I don’t think anyone is going to do anything serious,” said Philip Orlando, equity portfolio manager at Unity Management.

“People want to see how inflationary any of the programs will be and what the reaction from the debt market will be. If bonds sell off, you could see the equity market follow suit.”

Among the market highlights:

Shares of the Big Three U.S. auto makers rose in anticipation of Bush’s speech.

* General Motors surged 1 1/4 to 34, while Ford Motor rose 1 to 32 3/4, and Chrysler jumped 1 5/8 to 15 1/8. Shearson Lehman Bros. raised its ratings on Ford and Chrysler, reflecting expectations that the industry is set for a recovery in the next few months.

* In the paper and forest products sector, which is highly sensitive to the ups and downs of the economy, International Paper rose 1 5/8 to 74 3/8; Georgia-Pacific 1 7/8 to 64 3/4; Weyerhaeuser 1 1/4 to 31 5/8, and Louisiana-Pacific 1 to 54 5/8.

Louisiana-Pacific reported fourth-quarter profits of 24 cents a share, versus a loss in the corresponding period of 1990.

* Elsewhere among the blue chips, Boeing gained 1 3/4 to 54 3/8; Exxon 1/4 to 60 1/2; Eastman Kodak 1/2 to 49 1/8; Sears Roebuck 1 3/8 to 42, and Aluminum Co. of America 5/8 to 67.

* Union Carbide dropped 3/8 to 24. The company reported an $87-million loss, including special charges, from continuing operations for the fourth quarter.

* Telco Systems fell 1 5/8 to 12 1/8. It said its second-quarter profit would not meet expectations. Montgomery Securities lowered its estimates on the company.

* Premark International jumped 5 1/4 to 46 7/8 after reporting higher than expected fourth-quarter results.

* Commodore International lost 2 3/8 to 16 5/8 on second-quarter earnings that disappointed investors hoping for a report that would exceed high-end forecasts.

* Pathe stock jumped 1 to 3 1/4. Credit Lyonnais said it would welcome a good offer for MGM-Pathe, but is in no hurry to sell, Reuters reported.

* Concord Computing dropped 4 1/2 to 20 3/4. William Blair lowered its 1992 earnings forecast on the company.

Overseas, shares closed sharply higher in London. The Financial Times 100-share average ended 29.5 points up at 2,539.9.

Strong demand for chemical shares boosted the Frankfurt market. The 30-stock DAX average finished 18.81 points higher at 1,683.58.

Tokyo share prices declined in the slowest trading this year. The 225-issue Nikkei average fell 65.04 points, or 0.31%, closing at 21,007.11.

Credit

Treasury bond prices fell slightly as the bond market also awaited the President’s address and budget proposal.

The price of the Treasury’s benchmark 30-year bond fell 5/32 point, or $1.56 per $1,000 in face amount. Its yield, which moves in the opposite direction from its price, rose to 7.72% from 7.71% late Friday.

Market-watchers said traders are concerned that Bush’s expected plans to seek tax cuts as an economic stimulus could increase the federal deficit. That could lead to higher inflation, a prime concern of bondholders. A higher deficit would also increase the supply of bonds, depressing prices.

The market was pulled in opposite directions by comments from officials of the Treasury and the Federal Reserve on the question of lower interest rates, one analyst said.

The federal funds rate, the interest on overnight loans between banks, was 4%, up from 3.875% late Friday.

Currency

Finance ministers from the Group of Seven industrialized nations met over the weekend in suburban New York but failed to say in their closing communique where they would like to see foreign-exchange rates.

Some currency traders had expected the G-7 ministers to promote a stronger yen to help reduce Japan’s bulging trade surplus and to boost the prospects for a U.S. economic recovery.

“There was zero output from the meeting (on exchange rates) and that removed one bit of tarnish against the dollar,” said Jerry Egan, chief currency dealer at Bank of Boston.

The dollar finished at 125.225 yen in New York, up from 123.525 yen late Friday. The dollar finished at 1.611 German marks, up from 1.595 late Friday.

The dollar was also strong against the British pound. The pound fell to $1.783 in New York from $1.796 late Friday.

Commodities

Coffee futures prices slipped to new lows on New York’s Coffee, Sugar and Cocoa Exchange for the third straight session after the apparent rejection of a return to quotas.

On other commodity markets, precious metals gained; energy futures advanced; grains and soybeans were mixed, and meat and livestock futures prices improved.

Coffee for delivery in March settled 0.60 cent lower to 75.10.

On New York’s Commodity Exchange, precious metals edged higher amid fears that Russian President Boris N. Yeltsin is in poor health. Gold for current delivery settled 40 cents higher at $354.80 an ounce; March silver was 0.5 cent higher at $4.168 an ounce.

Energy futures rose, with light, sweet crude oil for March delivery settling 36 cents higher at $19.36 a barrel on the New York Mercantile Exchange.

Market Roundup, D10