FINANCIAL MARKETS : Dow Closes Off 6.78 Amid Profit Taking
Stock prices posted spotty losses Monday as traders cashed in some of the market’s recent gains.
The Dow Jones index of 30 industrials, up 72.40 points last week, slipped 6.78 to 2,402.68.
Declining issues outnumbered advances by about 7 to 6 in nationwide trading of New York Stock Exchange-listed stocks, with 667 up, 789 down and 506 unchanged.
Volume on the floor of the Big Board came to 142.10 million shares, down from 187.31 million in the previous session.
Analysts said it was not surprising to see the market run into some resistance after its sharp rise over the past four weeks.
Interest rates showed spotty increases in the credit markets, helping to dampen the mood of stock traders.
Brokers also noted that weakness in blue chips often occurs after they have been driven higher, as they were late Friday, by computer program trades related to a set of expiring stock index options or futures.
Aside from those technical forces, analysts said hopes remained high on Wall Street that interest rates would turn downward before long.
An increase last Thursday in key West German interest rates sent a brief jolt through the stock market. But it quickly recovered as traders concluded that the Federal Reserve wouldn’t take any similar action.
Syntex fell 2 3/4 to 44 1/2. The stock rose sharply Friday on speculation that F. Hoffmann-La Roche & Co. might be preparing to make a bid for the company.
But those expectations died down Monday when Hoffmann-La Roche announced an internal restructuring plan.
Sears Roebuck rose 3/4 to 46 5/8. The company reported first-quarter earnings of 70 cents a share, against operating profits of 43 cents in the comparable period last year.
Losers among the blue chips included American Telephone & Telegraph, down 1/8 at 34 5/8; Merck, down 1 at 67 3/4; General Electric, down 3/8 at 48, and Philip Morris, down 3/8 at 125 1/8.
International Business Machines, which raised its dividend, was unchanged at 113 1/2.
McGraw-Hill climbed 4 to 81 1/4. Traders cited revived rumors and speculation about a possible takeover or restructuring.
Terdata lost 1 to 16 1/4 in the over-the-counter market. Late Friday the company reported sharply lower operating earnings for its latest quarter.
In Tokyo, stock prices slumped Monday for the third straight session on concern about a rise in Japanese interest rates and the domestic political situation, brokers said. The 225-share Nikkei index lost 223.89 points, or 0.68%, to end at 32,805.92. Trade was the slowest this year--a scant 450 million shares against 900 million Friday.
In London, share prices on the London Stock Exchange closed marginally higher Monday as the market surrendered its early gains after Wall Street opened lower. At the close, the Financial Times 100-share index was up 1 point, or 0.05%, at 2,062.0.
Credit
Bond prices drifted in a narrow range, finishing little changed as traders appeared to be awaiting further evidence on the economy and the likely direction of interest rates.
The Treasury’s benchmark 30-year bond finished unchanged compared to late Friday and its yield held at 8.98%.
In the secondary market for outstanding Treasury securities, prices of short-term and intermediate governments were off 1/32 point, while long-term issues gained as much as 1/32 point, according to Telerate Inc., the financial information service.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, lost 0.29 to 1,128.50.
In corporate trading, industrials edged up. Moody’s investment grade corporate bond index, which measures total return on a portfolio of 80 corporate bonds with maturities of five years or longer, rose 0.27 to 302.59.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 5/32 point to 91 25/32. The average yield to maturity fell to 7.63% from 7.64% late Friday.
Yields on three-month Treasury bills rose to 8.99% as the discount rose 6 basis points to 8.69%. Yields on six-month bills rose to 9.14% as the discount rose 5 basis points to 8.64%. Yields on one-year bills rose to 9.34% as the discount rose 2 basis points to 8.63%.
A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.
The federal funds rate, the interest on overnight loans between banks, traded at 9.875%, up from 9.813% late Friday.
Dollar
The dollar drifted higher against most major currencies in quiet worldwide trading.
Gold prices rose. Republic National Bank of New York said an ounce of gold was bid at $386.75 as of 4 p.m. EDT, up $2.50 from late Friday.
Dan Holland, an assistant vice president for Discount Corp., attributed Monday’s dollar gains largely to technical factors. “People were squaring up positions. There really wasn’t anything new.”
Analysts said most dealers were awaiting the first-quarter gross national product data, which will be released Wednesday. The dollar could fall, they said, if the figures show the economy is slowing, because that would decrease the likelihood of higher U.S. interest rates.
In Europe, the dollar got much of its support from weakness in the West German mark, which reflected uncertainty about last week’s government reshuffling in Bonn. The mark’s decline could be reversed, though, by an expected government announcement of suspension of the 10% withholding tax on income from interest, analysts said.
In Tokyo, where trading ends before Europe’s business day begins, the dollar eased to 131.38 Japanese yen from 131.45. The dollar traded slightly lower at 131.37 yen in London, and at 131.55 yen in New York, up from 131.475 Friday.
In London, one British pound cost $1.7050 late Monday, more than a cent cheaper for buyers than Friday’s late $1.7160. Sterling stood at $1.70625 in New York, down from $1.7135 Friday.
Other late dollar rates in New York, compared to late Friday, included: 1.86075 West German marks, up from 1.8485; 1.6420 Swiss francs, up from 1.6305; 1.18925 Canadian dollars, up from 1.18685; 6.3070 French francs, up from 6.2720, and 1,364.625 Italian lire, up from 1,357.50.
Late dollar rates in Europe, compared to Friday: 1.8575 West German marks, up from 1.8460; 1.6395 Swiss francs, up from 1.6320; 6.2975 French francs, up from 6.2625; 2.0960 Dutch guilders, up from 2.0830; 1,362.50 Italian lire, up from 1,357.50, and 1.1890 Canadian dollars, up from 1.1850.
On the Commodity Exchange in New York, gold bullion for current delivery rose to $387.70 an ounce from Friday’s $384.90.
Gold was bid in London at $384.90 an ounce, up from $384.40 late Friday, and in Zurich at $384.65 an ounce, up from $384.15.
Earlier, in Hong Kong, gold closed at $384.05 an ounce, down from $385.45 late Friday.
Silver prices gained ground. On New York’s Comex, silver bullion for current delivery closed at $5.825 an ounce, up from $5.756. Silver rose in London to $5.81 an ounce from $5.78.
Commodities
Weekend showers in one of the driest parts of the Corn Belt triggered a steep selloff of corn and soybean futures on the Chicago Board of Trade, more than offsetting the sharp gains of the previous session.
Oats also closed lower but wheat futures gained slightly on continued dry weather in Kansas.
On other markets, energy futures plunged; precious metals advanced, and livestock and meat futures were mixed.
Wheat settled 0.50 cent lower to 2.5 cents higher, with the contract for delivery in May at $4.1575 a bushel; corn was 6.25 cents to 7.5 cents lower, with May at $2.69 a bushel; oats were 6.25 cents to 6.75 cents lower, with May at $1.9625 a bushel and soybeans were 11.5 cents to 17.5 cents lower, with May at $7.445 a bushel.
Corn and soybean prices also were pressured Monday by heavy farmer selling of old-crop supplies over the weekend following last week’s rally. May soybeans had surged 12.5 cents a bushel on Friday and corn had gained 2.5 cents to 5.5 cents.
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