Profit Taking Sinks Market; Dow Off 12.63 : Volume Light as Traders Await Employment Data
Profit taking pulled the stock market lower in quiet trading Thursday as investors warily awaited today’s release of the November jobs data.
Analysts said many investors appeared to prefer standing aside in advance of the November employment report due today, which could provide some indication of whether the economy is moderating or overheating.
“Right now everybody is sitting back waiting for the employment figures,” said Alfred E. Goldman, an analyst for the brokerage A. G. Edwards & Sons Inc. in St. Louis. “Nobody has any conviction, one way or the other.”
The Dow Jones index of 30 industrial stocks, up 12.98 points on Wednesday and nearly 40 points over the past three sessions, lost 12.63 to close at 2,101.88.
Over the past two weeks, the Dow industrials had risen about 75 points, setting the stage for Thursday’s mild profit taking.
Declining issues outnumbered gainers by about 8 to 7 in nationwide trading of New York Stock Exchange-listed stocks, with Big Board volume retreating to 129.38 million shares from Wednesday’s 157.81 million.
Analysts said traders were worried that employment growth in November would indicate faster-than-expected expansion in the economy.
If the economy were found to be expanding too quickly, many analysts fear that the Federal Reserve may feel compelled to push interest rates higher to slow it down and restrain inflation.
Higher rates make short-term fixed-income investments more competitive with the uncertain returns on stocks. Three-month Treasury bills, for instance, are yielding about 8.10%.
Goldman said most economists expect payroll growth of between 225,000 and 250,000 in November.
A number significantly higher than that, he said, “would mean the economy is in fact overheating and the Fed is going to have to step on the monetary brakes more heavily than they have already.”
But there is considerable uncertainty about how fast the economy is expanding.
A Reuters survey found that economists expect an unchanged unemployment rate of 5.3% for November and a rise in employment in the range of 200,000 to 285,000. Employment rose by a strong 323,000 in October.
Stocks rallied earlier this week on indications that the economy may be growing at a more moderate pace.
In a new report Thursday, the government said its chief forecasting gauge of future economic activity edged up a sluggish 0.1% in October after falling by a revised 0.3% in September.
RJR Nabisco fell 1 1/4 to 91 3/4 and was the most active stock on the NYSE. The company said late Wednesday that it had accepted an offer of $109 a share in cash and securities from buyout specialist Kohlberg Kravis Roberts & Co., spurning a competing offer from a management group.
American Telephone & Telegraph Co. was also active. It fell 1/2 to 29 3/8 after saying it will take a $6.7-billion charge against its fourth-quarter earnings to cover expenses related to getting rid of outdated telephone equipment.
General Cinema climbed 2 to 23 7/8 after announcing its planned to sell its soft-drink bottling business to Pepsico Inc. for $1.5 billion. Pepsico fell 2 to 38 7/8.
Stocks of some of the major retailing companies slipped after they reported November sales that analysts called sluggish. Sears, Roebuck lost 3/8 to 39 1/2 and J. C. Penney fell 1/2 to 52 7/8 but K mart rose 1/8 to 35 3/4.
In Tokyo, share prices turned down after reaching a record traded high, as optimism was overwhelmed by concern over the pace of recent gains and possible higher U.S. interest rates, brokers said. The Nikkei 225-share index fell 37.44 to 29,541.46.
Share prices also dropped on the London Stock Exchange in an edgy session, as players grew nervous about forecasts of difficult conditions in the British retailing industry. The Financial Times 100-share index finished down 13.7 at 1,778.7.
