STOCKS : Profit Taking Helps Push Dow 11.95 Lower
The stock market slumped Tuesday amid profit taking and ongoing investor uncertainty about the direction of the economy.
The Dow Jones index of 30 industrials fell 11.95 points to 2,741.68.
Declining issues outnumbered advancers by about 9 to 7 in nationwide trading of New York Stock Exchange-listed stocks, with 831 issues down, 656 up and 506 unchanged.
Big Board volume rose to 154.64 million shares from Monday’s 150.36 million.
Strength in technology stocks revived a sagging market early in the day after International Business Machines Corp. announced a major restructuring. IBM said it planned a $4-billion share buyback, a cutback of 10,000 jobs and a fourth-quarter charge of $2.3 billion. IBM rose 3/8 to 99 5/8.
But the market retreated just after midday, partly on profit taking as investors capitalized on recent gains. Wall Street analysts said selling activity, like the buying activity that preceded it, was concentrated in blue chip issues while the broader market languished.
“The market has had a nice little run. It got a little heavy so it will trade off a little bit before it starts another run,” said W. Daniel Williams, equities analyst at Dillon, Read & Co.
Tuesday’s stock activity also was tinged with skepticism about the outlook for the economy and corporate earnings, said Alfred E. Goldman, equities analyst for A. G. Edwards & Sons Inc. in St. Louis.
Observers said investors were beginning to turn their attention to Friday’s November unemployment numbers, which could provide a better indication of the economy’s direction.
Market participants are hoping that the data will confirm the slow-growth scenario suggested by other recent economic reports, analysts said. Further evidence of an economic slowdown could prompt the Federal Reserve to lower interest rates, thereby stimulating economic growth and corporate earnings in 1990.
Among actively traded issues on the NYSE, Reebok advanced 7/8 to 18 3/4, General Electric gained 1/4 to 63 3/8 and Alcoa added 1 3/4 to 75 1/2. Hilton jumped 5 1/2 to 99 5/8 amid speculation that a buyer may be announced soon. And UAL continued to advance, moving up 2 3/4 to 182 1/4 after Monday’s news that investment group Condor Partners raised its stake in United Airlines’ parent to 11.8% and is holding talks with the company and its major unions.
First Interstate Bancorp, the most active NYSE stock, fell 1/2 to 53 1/4, Circle K lost 1 to 3 1/2, Deere & Co. slipped 2 3/4 to 56 7/8 and Philip Morris declined 1/2 to 42 3/4.
In Tokyo, stocks posted record highs in brisk trade as investors bought broadly and rotated through domestic demand-linked stocks. The Nikkei 225-share average soared another 190.30 points to a record close of 37,494.17 after hitting a new traded high of 37,548.46 just after the opening.
Stocks also ended higher in thin trading on London’s Stock Exchange. By the close, the Financial Times 100-share index was up 24.1 points, or 1.05%, at 2,327.5.
CREDIT
Bond Prices Steady; Jobs Report Awaited Bond prices finished little changed after trading in a very narrow range.
The Treasury’s benchmark 30-year bond lost 1/16 point, or about 60 cents for every $1,000 in face value. Its yield edged up to 7.88% from 7.87% late Monday.
Credit market analysts said traders were reluctant to buy or sell large blocks of bonds in advance of Friday’s scheduled release of U.S. employment figures for November.
Kevin Flanagan, a money market economist for Dean Witter Reynolds Inc., said his firm expects that the figures will show an increase in non-farm payrolls of 150,000 to 160,000 compared to job growth of 233,000 the previous month.
“The figures would indicate a slight slowdown but no danger of recession in the near term,” he said.
Slow job growth could mean the economy is weakening and give the Federal Reserve more flexibility to lower interest rates, which would raise the prices of fixed-income investments such as bonds. But faster job growth may discourage the Fed from relaxing its monetary policy.
The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 8.438%, down from 8.50% late Monday.
CURRENCY
Dollar Lower in Uninspired Market The dollar declined against most major currencies in quiet, featureless trading.
Dealers said the foreign exchange market was uninspired because of a lack of news or new economic indicators after the recent surge in the West German mark. They predicted little change for the rest of this week.
“It’s very much a holiday market,” said Jeff Mondschein, manager of foreign exchange trading at Continental Illinois National Bank & Trust Co. in Chicago.
Currency dealers overseas are said to be closing out trading positions before the year end. Market volume tends to dry up toward the end of the year, when dealers are hesitant to risk profits or add to losses.
In Tokyo, where trading ends before Europe’s business day begins, the dollar finished at 143.68 Japanese yen, up from 143.48 yen on Monday. Later, in London, the dollar rose to 143.77 yen. By the end of the trading day in New York, the dollar was quoted at 143.70 yen, up from 143.65 yen late Monday.
In London, one British pound cost $1.5715, more expensive for buyers than late Monday’s $1.5638. Later, in New York, a pound fetched $1.5700, up from $1.5622 late Monday.
COMMODITIES
Copper Futures Fall as Demand Slides Copper futures prices fell sharply on New York’s Commodity Exchange as traders reacted to a downturn in demand for the metal.
In other markets, precious metal futures rebounded from Monday’s selloff, grain and soybeans futures were higher, while livestock futures gained, hog futures closed mixed and energy futures climbed.
Copper settled 1.35 to 2.40 cents lower, with the contract for delivery in December at $1.0620 a pound.
Copper prices plunged at the opening bell and continued under pressure throughout the day.
Analyst Don Tierney of Stanley Bell & Co. in New York said consumption of copper is declining because of the softening economic climate.
Precious metal futures rebounded on the Comex as traders operated on the belief that Monday’s sharp decline was overdone, Tierney said.
Helping gold and silver prices was the weakening of the U.S. dollar against the Swiss franc and the West German mark.
Gold was $2 to $2.40 higher, with December at $403.50 an ounce; silver was 2.4 to 3.5 cent higher, with December at $5.533 an ounce.
Grain and soybean futures closed mostly higher in modest trading on the Chicago Board of Trade as the market recovered some losses sustained in the previous session.
Corn futures led the trend upward in the aftermath of Monday’s U.S. Department of Agriculture weekly export inspections report, which was higher than expected, said analyst Dale Gustafson of Drexel Burnham Lambert Inc. in Chicago.
