Profit Taking Sweeps Market Before Trade Report; Dow Drops 10
Stock prices fell for a second day Tuesday as traders took profits on the market’s recent advance and buyers held back before today’s release of the trade report.
After edging down 1.43 points Monday, the Dow Jones average of 30 industrial stocks fell an even 10 to 2,214.64.
Declining issues outnumbered advancing ones by about 4 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with Big Board volume rising to 143.9 million shares, up from Monday’s 117.38 million.
Traders said many investors were sidelined before today’s release of the November merchandise trade figures, which are notoriously volatile and often roil the financial markets. Economists expect the November trade gap to widen to about $11.3 billion from October’s $10.35 billion.
“It’s just a lack of interest,” said Bear, Stearns & Co. analyst Lewis Smith. “We’re seeing apprehension about economic news.”
Meanwhile, the Dow industrials, which hit three straight post-crash closing highs last week before easing slightly Monday, provided fertile ground for profit taking.
“We got overbought. It was obvious we had to pause,” said Larry Wachtel of Prudential-Bache Securities.
The stock market, which had slipped as much as 15 points, came off its lows in the afternoon as the selling pressure abated. But investors found few reasons to buy, with Treasury bonds and the dollar edging lower in quiet trading.
Also weighing on the stock market was a retrenchment in the dollar, which has run up sharply in recent weeks, and another rise in oil futures prices, which are at 14-month highs.
Some analysts said the market seemed healthy despite the successive setbacks.
“When the market is concerned, any bad news will kill it. Lately the market has shaken off bad news,” said William LeFevre, market strategist at Advest Inc.
Analysts said the market could be influenced by the fourth-quarter earnings report at International Business Machines, due today. Profits are expected to be up because of good minicomputer sales and gains from an arbitration award from Fujitsu Ltd.
Apple Computer plunged 3 3/8 to 40 3/8 on volume of nearly 6.8 million shares, making it the most actively traded issue on the over-the-counter market or any market. Apple said its earnings rose 16% in the quarter, in line with expectations but added that it was cutting prices of some Macintosh computers and components.
Intel, another over-the-counter issue, fell 3/4 to 23 1/4 after announcing a 10.4% drop in quarterly earnings.
Much of the market’s action was related to takeovers or other special situations.
Foreign Stocks Off
Texas Eastern rose 1 3/8 to 46 3/8 on heavy volume after soaring 14 3/4 on Monday. It is being sought by Coastal for $42 a share, or $2.49 billion.
Marriott rose 1/8 at 33 7/8 on rumors, discounted by some analysts, that it might be the subject of a takeover offer.
Among other actively traded NYSE issues, RJR Nabisco rose 1/2 at 95 1/4, American Telephone & Telegraph rose 1/8 to 29 1/8 and IBM fell 3/8 to 123 7/8.
Among airline stocks, UAL rose 1 1/4 to 113 7/8 on speculation of a takeover attempt by Saul Steinberg, who has acquired a 5% stake. NWA rose 2 3/4 at 59 on rumors that UAL might try to buy it as a defense against a bid by Steinberg.
The Dow Jones average of 30 industrial stocks fell relatively more sharply than other market measures, mainly because one of its components, Goodyear, fell 2 1/8 to 51. The company said it expects to report fourth-quarter earnings from continuing operations that are down 53% from a year earlier.
In Tokyo, stock prices fell on profit taking after last week’s string of record highs. A stronger dollar and higher oil prices also added to the negative mood. The Nikkei 225-share index lost 70.86 points to close at 31,227.52.
Stock prices also closed lower in London on Tuesday as players took profits on the market’s recent strong rally. The Financial Times 100-share index finished 4.1 points lower at 1,867.7.