Market Holds Steady; Dow Up 0.28 : Analysts Note Lack of Profit Taking in Wake of Run-up
The stock market held steady in moderately active trading Wednesday, simmering a day after a strong rally that pushed market indicators to record or near-record levels.
Although stock prices failed to sustain the upward momentum of Tuesday’s session, they did not give up any of their large gains, either, analysts said.
Oil stocks dominated the day again.
The Dow Jones average of 30 industrial stocks edged up 0.28 to 1,904.53. That left the index less than 5 points short of its record.
Gainers outpaced losers by six to five among New York Stock Exchange-listed issues.
On Tuesday, the Dow Jones average spurted more than 32 points, propelled by the nation’s major banks cutting their prime rate to 7 1/2% from 8% and by computerized buying programs. The average set its record close--1,909.03--on July 2.
Wednesday’s session did start out strongly, with the Dow Jones average rising more than 7 points in the first hour of trading. But it quickly fell back. And its low point came at noon, when the average was down more than 5 points.
“We didn’t get the follow-through that some people expected,” said Robert Stovall of Stovall-Twenty-First Advisers Inc. But, “since yesterday’s price and volume increases were largely a surprise, maybe it was too optimistic to think that it would set a strong record-setting pace today.”
Michael Metz of Oppenheimer & Co. was more upbeat than Stovall.
“I think it’s a rather impressive showing,” he said. “The bond market was down sharply, but the (stock) market was relatively flat, which indicates there is good demand for equities in the background.”
Metz noted that Wall Street investors resisted the temptation to take profits.
“I think market participants are really building up their courage,” Metz said. “They are focusing on those stocks that would do best in an improving business climate.”
There was some negative economic news on Wednesday, however.
The Labor Department reported that the nation’s efficiency in producing goods and services declined in the second quarter of 1986. It said non-farm business productivity fell at an annual rate of 0.5%.
Oil stocks--supported by optimism that the Organization of Petroleum Exporting Countries would be able to uphold its agreement to cut production and by slightly firmer crude oil prices--littered the most active list.
IBM Unchanged
Texaco was up 1 3/4 at 34, Mobil up 3/8 at 37, Occidental Petroleum up 1 1/8 at 29 5/8, Chevron up 3/4 at 44 7/8, Philips Petroleum unchanged at 10 and Exxon up 1 3/8 at 69 3/8. Amoco rose 2 1/8 to 69.
Other actively traded issues were AT&T;, down 1/8 at 23 7/8, and IBM, unchanged at 141 1/8.
UAL jumped 2 7/8 to 58 because it apparently is no longer interested in acquiring troubled Frontier Airlines from People Express.
Other big gainers were Honda Motor, up 3 3/4 at 76; Morgan Stanley, up 2 7/8 at 74 3/4; Dow Chemical, up 1 3/8 at 56, and Polaroid, up 1 1/8 at 68 5/8.
On the downside, Upjohn fell 2 to 84 3/4 and Holiday fell 1 5/8 to 62 1/8.
The NYSE’s composite index rose 0.25 to 145.41, setting a record for the second day in a row.
Big Board volume totaled 143.27 million shares, against 156.64 million on Tuesday.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,982, compared to 2,890 on Tuesday.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 170.215 million shares.
Standard & Poor’s index of 400 industrials gained 0.54 to 278.95, and S&P;’s 500-stock composite index was up 0.46 to 253.30.
In the credit markets, bond prices tumbled and short-term interest rates rose.
Long-term maturities posted the sharpest decline, with the bellwether 30-year bond dropping about 3/4 point, or $7.50 per $1,000 face value, to yield 7.27%, up from 7.20% late Tuesday.
And the 20-year bond fell 13/16 points.
Dealers attributed the drop in prices mainly to some profit taking and concern among investors that Japan and West Germany won’t move soon to cut their discount rates, or the interest central banks charge financial institutions.
In the secondary market for Treasury bonds, prices of short-term governments fell 3/16 point and intermediate maturities fell about 3/4 point, according to the investment firm of Salomon Bros. The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
Among tax-exempt municipal bonds, general obligations were unchanged and revenue bonds were down 1/2 point. Trading was light to moderate.
Yields on three-month Treasury bills were up 1 basis point to 5.30%. Six-month bills rose 3 basis points to 5.34%. One-year bills were up 3 basis points at 5.40%.
The federal funds rate, the interest on overnight loans between banks, traded at 5.75%, down from 5.813% late Tuesday.
