2-Day Rally Fizzles as Investors Take Profits; Dow Retreats 11 Points
The stock market declined Thursday as investors cashed in a portion of their profits after a two-day rally that lifted the Dow industrials 108 points.
Worries that the May jobs report due out today will show swelling employment ranks and prompt a boost in the Federal Reserve’s discount rate also weighed on stocks, traders said.
After scoring its biggest two-day gain since last October, the Dow Jones industrial average gave back 11.56 points to close at 2,052.45.
The Dow Jones average of 30 industrials, up 107.57 points Tuesday and Wednesday, dropped back 11.56 to 2,052.45.
Lower NYSE Volume
Declining issues outnumbered advancers by slightly less than 3 to 2 in nationwide trading of New York Stock Exchange-listed stocks.
Volume on the floor of the NYSE came to 193.54 million shares, down from 234.56 million in the previous session. Nationwide, consolidated volume in NYSE-listed issues, including trading at regional exchanges and on the over-the-counter market, totaled 222.89 million shares.
“On balance, the profit taking was pretty much expected, and on top of that we have an employment figure coming out Friday (this) morning that makes people a little cautious,” said Hildegard Zagorski, an analyst at Prudential-Bache Securities.
Analysts say that if the number of new jobs turns out to be significantly higher than the market’s estimate of 225,000, the Fed may clamp down on credit to subdue the economy.
Because of that possibility, “We are seeing a little flattening out of positions ahead of the employment data,” said John Burnett, a trader at Donaldson Lufkin & Jenrette.
Weakness in Bond Market
Profit takers emerged at the opening bell, bringing it down 15 points within the first hour. In early afternoon, the Dow made a brief but ill-fated attempt to move into positive territory. But further weakness in the bond market prompted additional selling that drove the index to its lowest level of the session, down 21 points.
Burlington Northern gained 1 3/4 to 69 1/8. The company reported plans to sell a 13% interest in its Burlington Resources operation to the public.
Texaco fell 1 3/4 to 50 5/8. Financier Carl C. Icahn said he would probably sell his large stake in the company if he should lose his bid to gain control of five seats on the board of directors.
Other losers among the blue chips included American Telephone & Telegraph, down 3/4 at 27; Exxon, down 1 at 44 1/8; General Motors, down 5/8 at 76, and DuPont, down 5/8 at 84 7/8.
Macmillan rose 3/8 to 70 5/8 amid speculation that the recapitalization plan it unveiled earlier this week may be challenged. Rumors focused on investor Robert M. Bass, who holds 9% of Macmillan’s stock. There was also speculation another party was buying Macmillan shares.
In the precious metals group, ASA Ltd. rose 1 1/2 to 46 1/8; Battle Mountain Gold 7/8 to 18 1/8; Hecla Mining 1 3/8 to 15 3/4; Callahan Mining 2 to 19, and Sunshine Mining 5/8 to 4 3/4.
Elsewhere in the metals sector, Alcoa gained 1 to 47 3/4; Asarco climbed 1 to 26, and Phelps Dodge rose 1 to 41 7/8.
S&P; Industrial Index Fell
Circus Circus, which reported higher quarterly profits, climbed 1 5/8 to 29 5/8.
The Wilshire index of 5,000 equities closed at 2,634.068, down 6.395 from Wednesday’s close.
The NYSE’s composite index of all its listed common stocks dropped 0.67 to 149.76.
Standard & Poor’s industrial index fell 1.68 to 306.36, and S&P;’s 500-stock composite index was down 1.36 at 265.33.
The NASDAQ composite index for the over-the-counter market slipped 0.16 to 374.65. At the American Stock Exchange, the market-value index closed at 299.08, up 0.79.
On the Tokyo Stock Exchange, the Nikkei 225-share average closed at 27,869.36, up 165.45.
Stock prices in London closed slightly higher as the market rose late in the day after Wall Street erased some of its earlier losses.
The Financial Times 100-share index closed up 4.6 points at 1,810.3.
