Dow Falls 11.92 on Profit Taking
Stock prices closed lower Thursday, breaking a three-session winning streak as Wall Street’s “Gorbachev rally” showed signs of fading.
The Dow Jones index of 30 industrials, which had risen 61.35 in the week’s first three trading days, dropped 11.92 to 2,141.71.
Declining issues outnumbered advances by about 9 to 5 in New York Stock Exchange trading. Big Board volume slowed to 124.15 million shares from Wednesday’s 148.36 million. Without fresh news to lend momentum, stocks retreated from their recent gains on light profit taking in blue chip issues, brokers said.
Soviet leader Mikhail S. Gorbachev cut short his visit to the United States to return home because of the devastating earthquake in Soviet Armenia.
Analysts said traders remained encouraged by his pledge Wednesday to make significant cutbacks in military forces.
Heading to Sidelines
But some financial observers raised questions about how much help that development would bring anytime soon toward reducing the U.S. budget deficit through lessened defense spending.
In addition, brokers said, attention on Wall Street shifted back to the near-term outlook for interest rates and the possibility of a further increase in the Federal Reserve’s discount rate.
“People are heading to the sidelines again. Hopefully, we’ll go down to more reasonable levels and then people will see that some blue chip issues are still bargains,” said James Andrews, a trader with Janney Montgomery Scott.
United Telecommunications rose 1 5/8 to 45 3/8 and GTE gained 1/8 to 45 1/2, while American Telephone & Telegraph finished unchanged at 29 3/4 after trading as high as 30 1/8.
The federal government awarded large contracts for a new telephone system to AT&T; and U S Sprint, which is owned by GTE and Unitel.
Losers in the blue chip sector included International Business Machines, down 1 5/8 at 119 3/8; Exxon, down 1/8 at 44 1/4, and General Motors, down 3/8 at 86.
Technology issues were also weak. Digital Equipment dropped 1 to 94 5/8; Hewlett-Packard fell 1 7/8 to 49 5/8; Honeywell 1 5/8 to 58 1/8, and Data General was off 1/2 at 17 3/4.
Eastman Kodak Co. rose sharply on heavy volume, but gave back those gains to close down 1/2, at 45 3/4. The photo company could not explain the activity in its share price.
Wyse Technology fell 1/4 to 6 5/8, trading at a new 52-week low. On Wednesday, the company said it expects to post a loss for the fiscal third quarter that ends Dec. 31 and that its results for the nine months through Dec. 31 might also be in the red.
Sovran Financial rose 1 1/2 to 34 1/2. The stock was added to Standard & Poor’s 500-stock composite index, prompting buying by index funds set up to match the performance of the S&P; 500.
Shares of SmithKline Beckman Corp. rose amid recurring rumors that the company was the target of a takeover by a European chemical and pharmaceutical company, traders said. SmithKline rose 4 1/2 to 52 1/2 in heavy trading.
Traders said rumors have been circulating that Beecham Group PLC or Ciba-Geigy AG had acquired a 4.7% stake in SmithKline.
Shares of Damon Corp. were up 1 5/8 to 22 3/8. Nomad Partners LP said it is in negotiations with Damon for a possible acquisition of the medical instrument company.
Alco Standard Corp. shares were lifted by news that the multi-industry company has started a previously announced Dutch auction tender to buy up to 7.5 million shares. Alco rose 2 1/4 to 26 1/2.
Tokyo Closes Lower
Texaco Inc., which rose earlier this week on takeover speculation, fell 3/8 to 51 on robust trading.
The Wilshire index of 5,000 equities declined 13.456 to 2,716.515.
The NYSE’s composite index of all its listed common stocks dropped 0.77 to 155.37.
Standard & Poor’s industrial index lost 2.08 to 318.46; its 500-stock composite index was down 1.56 at 276.57.
The NASDAQ composite index fell 1.14 to 375.22; the American Stock Exchange index closed at 297.38, down 0.39.
The Tokyo stock market, which hit a milestone this week when its leading index reached 30,000, retreated Thursday when the Nikkei 225-share index fell 291.92 to 29,758.90; brokers said it was only catching its breath before climbing again.
Share prices also closed lower on the London Stock Exchange. The Financial Times 100-share index fell 13.8 lower to 1,757.9.
