Profit Taking Sends Dow Down 4
The stock market retreated further Thursday as some investors took profits from the recent rally and others held back from buying ahead of the January jobs report due out today. The Dow Jones industrial index ended down 4.46 points at 2,333.75, extending its modest 4.11-point loss on Wednesday.
Advancing issues outnumbered declines by about 7 to 6 in nationwide trading of New York Stock Exchange-listed stocks. Big Board volume came to 183.43 million shares, down from 215.64 million in the previous session.
“It’s a very benign decline,” said Jon Groveman, head trader at Ladenburg Thalmann. “People are lightening their positions ahead of the employment report.”
The report is viewed as a good gauge of the economy’s strength and therefore provides a clue as to whether the Federal Reserve will feel pressured to nudge rates higher.
“It’s basically at a standstill while we wait for the numbers,” said trader Ken Ducey of S. G. Warburg. Economists expect that 291,000 jobs were created last month, up from 279,000 in December, and that the jobless rate remained unchanged at 5.3%.
Substantial Rally
“Basically you’re seeing people nervously taking profits after the explosion we had last week and early this week,” said James McCarthy, a technical analyst with Paine Webber Inc.
In the six sessions leading to Wednesday, the Dow index tacked on more than 100 points in a rally helped by firm U.S. Treasury bond prices and a rising dollar.
The mild profit taking of the past two days is “probably healthy for the market from a technical standpoint and could establish a new zone of support that would take the market higher over the intermediate term,” McCarthy said.
Many analysts agree that the market’s tone looks good. “The short-term trend is definitely up,” said Groveman of Ladenburg Thalmann. “Sentiment is definitely starting to change.”
“People who are uncommitted are looking for an entry point,” said Michael Metz of Oppenheimer & Co.
Some high-technology stocks were strong, continuing to benefit from recent earnings reports that exceeded expectations.
Stocks closed higher in active trading on the Tokyo Stock Exchange. The Nikkei 225-share index, which fell 220.62 points Wednesday, gained 137.62 to close at 31,498.30. Share prices also rose on the London Stock Exchange after the market’s already bullish mood was boosted by the government’s approval of the $5-billion bid for Consolidated Gold Fields PLC. The Financial Times 100-share index closed 3.7 points higher at 2,043.4.
