STOCKS : Profit Taking Cools Rally; Dow Gains 8.96
Stock prices posted modest gains Wednesday, extending Tuesday’s sharp rally, but closed off their session peaks as profit takers braked the advance.
The Dow Jones index of 30 industrials, up more than 16 points at mid-session, closed with a 8.96 gain at 2,761.09. On Tuesday it climbed 23.89 points.
Advancing issues slightly outnumbered declines in nationwide trading of New York Stock Exchange-listed stocks, with 791 up, 734 down and 496 unchanged.
Analysts said traders drew some encouragement from the Commerce Department report that retail sales rose 0.8% in November, the biggest increase in four months, reflecting the start of the holiday gift-giving season. Economists had expected a 0.2% rise.
That eased a few worries on Wall Street that slackening consumer spending might be increasing the chances of a recession in the near future.
But open-market interest rates rose following the news, and investors still seemed to be cautious about the outlook for the economy in 1990 and the prospect that corporate profits might continue to lag.
Brokers also noted that the market bogged down after the Dow Jones industrial index moved within striking distance of the record closing high of 2,791.41 it reached on Oct. 9, before it took a 190-point drop four days later.
Energy stocks were mixed in active trading, running into some resistance after their recent rally inspired by cold weather in many parts of the United States and forecasts of higher oil prices in the months ahead.
Among the volume leaders, Baker Hughes rose 1/8 to 26 7/8, Exxon dropped 1/2 to 50 3/4, Amoco lost 3/4 to 54 7/8 and Texaco was down 7/8 at 56 1/4.
In the blue chip industrial sector, Philip Morris rose 1/4 to 43, American Telephone & Telegraph gained 1 1/2 to 46 5/8, Coca-Cola added 3/4 to 80 1/4 and Du Pont rose 1 to 124 1/8.
But leading computer and technology issues were weak, apparently depressed by year-end tax selling. International Business Machines dropped 1 1/8 to 95 7/8 and Digital Equipment was down 2 3/8 at 82 5/8, trading at its lowest levels in more than three years.
UAL fell 8 to 168 3/4 as hopes diminished for emergence of a new deal to replace the buyout plan by an employee-management group that was dropped this fall after it ran into financing problems.
Big Board volume rose to 184.66 million shares, up from 176.82 million on Tuesday.
In Tokyo, stock prices climbed to new closing highs, piercing the 38,000 mark on the Nikkei index, in moderate trading buoyed by foreign buying buying on the index. The 225-share Nikkei average soared 258.89 points to a record 38,062.42.
Stocks also closed higher in moderate trading on London’s Stock Exchange, as the market took its cue from a buoyant Wall Street. At the close, the Financial Times 100-share index was up 22.7 points, or 1%, at 2,386.2.
CREDIT
Bond Prices Are Mostly Higher Bond prices were mostly higher after traders dismissed the large jump in November retail sales in favor of revised figures for the previous month, which pointed to an economic slowdown.
The Treasury Department’s bellwether 30-year bond rose 3/32 point, around $1 per $1,000 face amount. Its yield, which declines when the price rises, fell to 7.88% from 7.89% late Tuesday.
The retail sales report initially sent bond prices lower as traders feared a resumption of stronger economic activity would diminish chances the Federal Reserve would lower interest rates.
Bond prices tend to rise in periods of economic softness because investors tend to turn to long-term, fixed-income investments such as bonds. The Fed also typically lowers interest rates to stimulate the economy, which also pushes prices higher.
Prices rose Wednesday after traders focused on the Commerce Department’s revised downward revision for October retail sales. The department said sales plummeted 1.3% in October, instead of the 1% originally reported.
“It implies that there may be similar downward revisions to November, and therefore that the consumer is really weakening and the economy is really weakening,” said analyst Kathleen Camilli at Drexel Burnham Lambert Inc.
The federal funds rate, the interest on overnight loans between banks, was at 8.563%, up from 8.438% late Tuesday.
CURRENCY
Dollar Mixed in Hectic U.S. Trading The dollar finished mixed against other major currencies in choppy, hectic dealings after rebounding overseas.
In currency trading, Zlatko Glamuzina, chief currency dealer at the New York office of Banco di Sicilia, likened Wednesday’s trading to “a tug of war between the bulls and the bears.”
“The bulls would like to see the dollar go up and they say it has reached its bottom, but the bears are trying to pull it lower and seem to be winning the battle overall,” Glamuzina said.
The dollar got a boost from rumors that Soviet President Mikhail S. Gorbachev had resigned, although they were swiftly denied by the Soviet Embassy in Washington, currency dealers said. Also supporting the dollar were reports of intervention by some central banks to push down the value of the surging West Germany mark, they said.
Putting a damper on the dollar, however, was speculation that the Federal Reserve was easing interest rates.
In Tokyo, where trading ends before Europe’s business day begins, the dollar fell 0.77 Japanese yen to close at 143.70 yen. It traded at 144.13 yen in London, and at 144.05 yen in New York, up from 144.00 yen late Tuesday.
The dollar was stronger against the British pound. Sterling bought $1.5955 in London, down from $1.6027 Tuesday, and $1.6000 in New York, down from $1.6085 late Tuesday.
COMMODITIES
Heating Oil Gains for 11th Session Heating oil for near-term delivery rose for the 11th straight day, while livestock and meat futures advanced and grains and soybeans were mostly higher.
January heating oil futures surged on the New York Mercantile Exchange following the American Petroleum Institute’s report late Tuesday of an unexpectedly large reduction in U.S. stocks of petroleum distillates last week. Extremely cold weather in Europe and the United States have kept demand for heating oil strong.
Other energy futures were mixed.
West Texas Intermediate crude oil settled 1 cent lower to 12 cents higher, with January at $20.77 a barrel; heating oil was 0.60 cent lower to 0.66 cent higher, with January up 0.66 cent at 67.96 cents a gallon, and unleaded gasoline was 0.10 to 0.20 cent lower, with January at 51.93 cents a gallon.
Livestock and meat futures ended mixed on the Chicago Mercantile Exchange with most of the strength centered in the pork belly pit, where prices rose sharply in a technically inspired rebound from recent steep losses.
