FINANCIAL MARKETS : Stocks : Profit Taking Snuffs Rally; Dow Off 10.44
Stock prices pulled back Tuesday amid selling to collect profits amassed during the previous two strong sessions.
The Dow Jones index of 30 industrials, which ran up a gain of nearly 82 points on Friday and Monday, finished with a loss of 10.44 points at 2,453.45.
Declining issues outnumbered advancing ones by about 7 to 6 in nationwide trading of New York Stock Exchange-listed stocks, with 791 down, 677 up and 500 unchanged.
Volume on the floor of the Big Board came to 173.1 million shares, down from 179.35 million in the previous session.
Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 211.64 million shares.
“Basically, what we’re seeing is a bit of a pullback after two very strong days,” said Gordon L. Smith, a managing director at the investment firm Alex. Brown & Sons Inc. in Baltimore. “This is quite normal. The market took quite a run and needs to pause.”
The selling, which wasn’t confined to any particular type of stock, appeared to be motivated mainly by the desire to collect profits, he said.
Market operators decided the time was right to sell because the government is due to release some potentially market-moving economic figures today and Thursday, said Peter VandenBerg, a senior vice president at Shearson Lehman Hutton Inc.
Today, the Commerce Department is scheduled to report on the country’s merchandise trade performance in March, and the following day the Labor Department releases its April consumer price index.
International Business Machines skidded 1 3/8 to 111 3/8. The computer giant unveiled a new OfficeVision family of software designed to be compatible with IBM machines of all sizes.
Among companies involved in mergers or attempted takeovers, Ogilvy Group eased 1/8 to 53 1/8 in heavy over-the-counter trading as more than 1.7 million shares changed hands. The advertising and marketing concern has agreed to be acquired by Britain’s WPP Group for $54 a share, or about $864 million.
Avon Products, which has received a $39-a-share offer from privately held Amway Corp., was up 5/8 at 40 1/4, a new 52-week high. Amway has indicated that it would consider paying more if Avon would agree to a negotiated deal.
On the Tokyo stock market, share prices rose, boosted by purchases by investment trusts and some financial institutions. But the dollar’s strength against the yen kept many sidelined, brokers said.
The 225-share Nikkei index surged 210.16 points to 33,926.45. The index fell 150.04 points Monday.
In London, share prices closed lower in light trading as the market consolidated its strong gains of the past two trading sessions.
At the close, the Financial Times 100-share index was down 13.2 points at 2,136.7, just 0.7 point above its lowest level.
Credit
The bond market closed mostly higher as a late rally boosted the price of long-term government securities.
The Treasury’s benchmark 30-year bond was up 9/32 point, or about $2.82 per $1,000 face amount. Its yield, which moves in the opposite direction from price, fell to 8.81% from 8.84% late Monday.
Trading was light most of the day, with prices stable or slightly down until a late flurry of buying.
Analysts attributed the market’s behavior, which followed a decline in bond prices Monday, to internal influences following a strong run-up last week on signs of modest inflation.
In the secondary market for Treasury bonds, prices of short-term governments were down 1/32 point to up 1/32 point, intermediate maturities were unchanged to up 3/16 point and long-term issues were up as much as 3/16 point, according to Telerate Inc., a financial information service.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds was unchanged at 92 7/8. The average yield to maturity held steady at 7.52%.
Yields on three-month Treasury bills issued Monday rose to 8.50% as the discount rose 3 basis points to 8.22%. Yields on new six-month bills fell to 8.72% as the discount fell 4 basis points to 8.25%. Yields on one-year bills were unchanged 8.84% as the discount held at 8.19%.
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 9.1875%, down from 9.8125% late Monday.
