Stock Prices Edge Downward in Uninspired Trading; Dow Slips 7
The stock market finished lower Tuesday in dull trading. What little action there was came from stocks of companies involved in takeovers.
The Dow Jones index of 30 industrials slipped 7.01 points to 2,472.88 after hovering in a narrow range through most of the trading session.
Declining issues edged out advancing ones by about 4 to 3 in nationwide trading of New York Stock Exchange listed stocks, with 774 down, 657 up and 539 unchanged.
Volume on the floor of the Big Board totaled 167.65 million shares, up from 130.72 million in Monday’s session, which had been the slowest pace in more than two months.
The market “is fatigued if not exhausted,” said Michael Metz, an analyst for Oppenheimer & Co. “I think we’ve entered the summer doldrums early,” he said, referring to Wall Street’s summer slowdown, which usually starts in early July.
The market started with an advance fueled by stocks involved in “special situations.” But analysts said the rally ran out of steam shortly before noon as buying interest waned.
Airline issues remained active following news Monday that Northwest Airlines’ parent NWA Inc. accepted a $4-billion buyout offer from a group led by Los Angeles investor Alfred A. Checchi.
On the NYSE, NWA was down 3/8 at 113 3/4 after soaring on Monday. Pan Am, a loser in the battle for NWA, was up 1/4 at 4. AMR Corp., the parent of American Airlines, had jumped 1 1/2 to 63 1/2. United Airlines’ parent UAL Corp. surged 5 5/8 to 133 1/2 after several analysts said they believe that its asset value is far higher than its current stock price.
“The pizazz lies in the deal situations,” said Larry Wachtel, an analyst for Prudential-Bache Securities. “All the airlines are going berserk.”
Other takeover-related issues also were actively traded. They included Harcourt Brace Jovanovich, which announced plans to sell its six theme parks and its real estate holdings. It jumped 3 3/4 to 13 7/8.
The Tokyo stock market rose Tuesday as some investors were tempted back into the market by signs of at least temporary stability in currency rates. The Nikkei 225-share index gained 220.29 points to close at 33,233.47 after slipping 41.99 Monday.
Share prices on the London Stock Exchange closed firmer, supported by moderate buying and a steady pound. The Financial Times 100-share index closed 10.1 points higher at 2,164.8.
Currency
The dollar gained against major foreign currencies in domestic dealings after a mixed performance abroad.
Gold prices posted minor changes. Republic National Bank of New York quoted a bid of $365 for an ounce of gold at 4 p.m. EDT, $1 lower than Monday’s late bid.
New York-based currency dealers said the dollar closed at the high end of the range within which it has traded recently.
“Basically, it was a reasonably quiet day but the dollar did move well in its range,” said Samuel Lek, a managing director in the foreign exchange department of Bear, Stearns & Co.
Lek said there was no fundamental reason for the dollar’s gain. Dealers probably decided the time was right to increase their dollar holdings after lightening them in recent days, he said.
Credit
Bond prices rebounded behind the strengthening dollar in moderate trading.
The Treasury’s benchmark 30-year bond rose about 11/16 point, or $6.88 per $1,000 face amount, after falling 7/16 point on Monday. Its yield, which moves in the opposite direction from its price, fell to 8.28% from 8.34% late Monday.
Analysts said that, with no economic news to move the market, bonds continued tracking the dollar’s movements.
The dollar advanced against some major currencies in New York dealings despite reported intervention by the Federal Reserve. The dollar ended mixed in Europe after reports of dollar selling by Japan’s central bank.
“There was a smart move upward in the dollar in New York. That provided a big lift to Treasuries,” said William Sullivan, director of money market research for Dean Witter Reynolds.
Yields on three-month Treasury bills declined to 8.41% as the discount fell 7 basis points from the level at auction on Monday to 8.14%. Yields on six-month bills slid to 8.52% as the discount remained unchanged at 8.07%, the level at Monday’s auction. Yields on one-year bills were down to 8.51% as the discount fell 6 basis points to 7.91%.
The federal funds rate, the interest on overnight loans between banks, was trading at 9.375%, unchanged from late Monday.
Commodities
Silver futures prices slid about 9 cents an ounce on New York’s Commodity Exchange as the dollar strengthened and other commodity prices fell, easing inflation fears. Gold futures prices also dropped.
On other markets, grain and soybean futures fell, energy futures were mixed and livestock and meat prices were mixed.
Silver settled 9 cents to 9.1 cents lower, with the contract for delivery in July at $5.25 an ounce; gold was 70 cents to $1 lower, with August at $369.60 an ounce.
Precious metals prices had been on the upswing, rising in five of the six previous sessions on perceptions that inflation was gathering steam. Precious metals are considered a safe investment in times of rising prices.
Inflation worries had intensified after sharp increases in most commodity futures prices on Monday, and many precious-metals traders expected the rally to continue Tuesday. Instead, most commodity prices opened steady or lower.
July silver topped out at $5.38 on its third rally attempt, and many traders then gave up and sold the market, Rothman said.
Corn and soybean futures prices dropped on the Chicago Board of Trade as wetter weather forecasts for the Corn Belt took the edge off drought fears. Wheat futures also retreated.
The corn and soybean markets lost about half of the ground they gained Monday, when the Midwest looked to be due for an extended spell of hot, dry weather.
But Tuesday’s forecasts predicted rain in the northern and western Corn Belt by the end of this week, and selling pressure was strong from the opening bell.
