STOCKS : Prices Lower for 2nd Day; Dow Falls 4.91
Stock prices retreated further Wednesday, narrowly extending the previous day’s losses, as investors were unwilling to buy ahead of Friday’s November jobs report.
The Dow Jones index of 30 industrials slid 4.91 points to finish at 2,736.77, the first time since early November that it has fallen in two consecutive sessions.
Declining issues narrowly outpaced advancers in nationwide trading of New York Stock Exchange-listed stocks, with 767 issues down, 714 up and 512 unchanged.
Big Board volume came to 145.85 million shares, down from 154.64 million on Tuesday.
The market struggled through a lackluster session with banking and technology stocks taking the brunt of the selling activity.
Wall Street analysts attributed the market’s sluggishness to investor caution ahead of Friday’s unemployment report, which is expected to provide a clearer picture about the outlook for interest rates.
“We still haven’t gotten off the dime with regard to what we’re doing and where we’re going. Interest rates remain a mystery and what the Fed is going to do,” said Thomas Walsh, head of equity trading for Nikko Securities International.
“People are sitting here waiting for canned book numbers and employment numbers. Each day it’s a new excuse not to invest,” he said.
A government report on third-quarter productivity and the Federal Reserve’s “Beige Book” summary of economic conditions was generally neutral for the market.
The Labor Department reported productivity in the non-farm sector of the economy improved at an annual rate of 2.5%, while hours worked grew at a slower 1.3%, a sign of slackening demand for goods.
However, the bond market, which had been stagnant in recent sessions, reacted negatively to the Fed report, which said the nation’s economy was generally “stable to modestly expanding.” Traders said weakness in the credit market helped depress stock prices.
Despite the caution, most analysts said the stock market showed signs that it is working its way into a year-end rally.
“The averages are moving up relieving the oversold conditions that developed in October,” said Richard McCabe, manager of market analysis for Merrill Lynch & Co.
Among actively traded issues on the NYSE, IBM lost 1 to 98 5/8 as investors sold stock amid uncertainty about the effect of a massive restructuring announced Tuesday, dealers said.
Banking stocks also weakened after a government report that showed the nation’s commercial banks lost $744 million in the third quarter due partly to rising real estate loan problems. First Interstate Bancorp, the most active NYSE stock, fell 1 1/4 to 52, BankAmerica lost 1 3/8 to 26 and NCNB declined 2 1/2 to 42 3/8.
McGraw Hill, not among the most actives, declined 2 to 61 1/2 after the company announced a restructuring that involves eliminating 1,000 jobs and taking fourth-quarter pretax charges of $220 million.
Chevron, meanwhile, gained 1 1/4 to 72, Deere & Co. advanced 5/8 to 57 1/2 and AT&T; was unchanged at 43 5/8.
CREDIT
Bond Prices Drop in Response to Report
The Fed’s Beige Book report that U.S. economic activity ranged from stable to slightly stronger last month sent bond prices downward.
The Treasury’s benchmark 30-year bond fell 11/32 point, or $3.44 per $1,000 face amount. Its yield, which rises when bond prices fall, climbed to 7.91% from 7.88% late Tuesday.
“The Beige Book led people to believe the Fed looks at the economy as being stronger than what a lot of perceptions in the market are and reduces the chance of further Fed easing,” said economist Steven A. Wood of BankAmerica Capital Markets Group in San Francisco.
“The market was looking for something that would highlight more weakness than was given,” he said.
Comments by an unidentified senior Fed official that the economy was continuing to expand and there was little danger of a recession also propelled bond prices downward, Wood said.
The federal funds rate, the interest on overnight loans between banks, was quoted at 8.438%, unchanged from late Tuesday.
CURRENCY
Dollar Declines; Mark in Spotlight
The dollar declined against most major foreign currencies in worldwide trading as dealers kept their buying interest focused on West German marks.
Gold prices edged slightly higher in the United States after turning in a mixed performance overseas.
On the New York Commodity Exchange, gold for current delivery ended at $404.90 an ounce, up $1.40 from late Tuesday. Republic National Bank of New York quoted an ounce of gold bullion at $404.60 as of 4 p.m. EST, up $1.10 from Tuesday’s late bid.
Currency dealers received an incentive to sell dollars from reports that a U.S. Treasury official said the dollar’s recent decline against the mark was not alarming.
The remark, attributed to David Mulford, Treasury undersecretary, was interpreted to mean that the U.S. government would not intervene aggressively in foreign exchange markets to stem the dollar’s slide against the mark.
“It seems everybody is looking for a lower dollar,” Palladino said. “It’s more of a mark-driven market than a dollar-driven market.”
Some dealers said the strength of the West German economy justified the rise in the mark’s value.
Demand for marks has surged as the borders between East and West Germany have crumbled. The assumption is that liberalizations in East Germany and elsewhere in Eastern Europe could make the West German economy boom, possibly leading to higher interest rates in that country.
Higher West German interest rates would tend to increase returns on mark-denominated investments.
The dollar began its trading day in Tokyo by rising to a close of 143.75 Japanese yen from 143.68 yen on Tuesday. In London late Wednesday, the dollar traded at 143.85 yen. Later in New York, the dollar was quoted at 144.025 yen, up from 143.70 yen late Tuesday.
COMMODITIES
Grain, Soybeans Rise in Busy Trading
Grain and soybean futures prices closed higher in active trading as traders reacted to prospects of increased export activity.
In other markets, sugar prices surged, energy futures were higher, precious metals were firm and livestock and pork futures were mixed.
Wheat settled 2.25 to 6 cents higher, with the contract for delivery in December at $4.085 a bushel; corn was 1.25 to 2.25 cents higher, with December at $2.36 a bushel; oats were 0.75 to 1.25 cents lower, with December at $1.435 a bushel, and soybeans were 2.25 to 5.75 cents higher, with January at $5.7925 a bushel.
Wheat led the rally on the Chicago Board of Trade, with buying spurred by news that the U.S. Department of Agriculture has targeted China for 1 million metric tons of wheat under the department’s Export Enhancement Program.
“There is speculation that the Soviet Union will be next” to benefit from the program, said analyst Ted Mao of Shearson Lehman Hutton Inc. in New York.
U.S. and Soviet negotiators are trying to hammer out a new long-term grain pact. The current grain pact will expire next year.
Corn futures were higher because of speculative demand resulting from the strong surge in wheat prices, Mao said.
The same held true for soybeans, which also drew support from slow farmer selling and reports of barge delays on the Mississippi River.
Sugar futures climbed dramatically on New York’s Coffee, Sugar & Cocoa Exchange as traders reacted to news that a Brazilian judge has banned the import of methanol to alleviate a shortage in fuel alcohol.
Sugar was 0.31 to 0.77 cent higher, with January at 14 cents a pound.
