STOCKS : Wall Street Rally Cools; Dow Up 0.92
Wall Street took some time out Tuesday after running up a string of sharp gains, but its retreat was milder than expected and the Dow Jones industrial index still managed to breach a new closing high.
Market watchers had anticipated heavy profit taking after the Dow surged more than 176 points in less than two weeks. But with relatively light selling, “we had a constructive day,” said Dennis Jarrett, an analyst with Kidder, Peabody & Co.
The Dow Jones index of 30 industrials inched up 0.92 to 2,822.45, just eclipsing the record high of 2,821.53 set on Monday. The advance brought to 177.40 points the surge in Wall Street’s best-known barometer since April 27.
The average fluctuated during the day, but the broader market stayed in negative territory. At the close, declining issues outnumbered advancers by about 4 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with 654 up, 856 down and 505 unchanged.
Analysts said Wall Street showed continuing signs of strength. Tuesday’s selling was an extension of profit taking that began Monday, when the Dow industrials rose 50 points and then fell back, closing with a 19.95-point gain.
While Monday’s performance raised the specter of heavier losses Tuesday, “volume dried up on the downside,” Jarrett said.
Big Board volume retreated to 165.73 million shares, from Monday’s 225.41 million
The stock market’s rally in the last two weeks has been attributed to evidence that inflation is easing, which has sent interest rates plunging. Last Friday’s announcement of the second straight monthly decline in wholesale prices fed a 91.22-point gain in the Dow Jones industrial average.
The market also has been bolstered by the perception that the Bush Administration and Congress are willing to negotiate to reduce the nation’s budget deficit.
Analysts said the market ignored a government report Tuesday that industrial production fell 0.4% in April, the first decline since January, but they said there was some concern on Wall Street about today’s scheduled release of consumer price figures for April.
Technology stocks helped lead the market Tuesday. Compaq Computer jumped 2 1/8 to 114 1/2, IBM picked up 1 3/8 to close at 115 5/8, and Texas Instruments rose 2 1/4 to 39 7/8.
Retailing stocks were among those hardest hit by profit takers. J. C. Penney, which announced a big earnings increase, fell 1 3/8 to 65 1/4.
American Express was up 1 3/8 to 30 5/8 amid speculation that it was negotiating to sell its troubled Shearson Lehman Hutton Inc. brokerage subsidiary to Primerica.
Among other blue chip stocks, Philip Morris rose 1/8 to 44 7/8, AT&T; fell 5/8 to 41 3/4 and Boeing slipped 1 to 77.
In foreign trading, stock prices on the Tokyo Stock Exchange closed mixed as a round of profit taking dampened an otherwise bullish market. The Nikkei 335-share index eased 45.61 points to close at 31,997.04.
In London, stock prices closed slightly lower in lackluster trading, running out of steam after Monday’s strong rally. The Financial Times 100-share index finished down 2.3 points at 2,212.2.
The DAX index of 30 stocks fell almost 1% in Frankfurt, West Germany, to close down 14.70 points at 1,860.33.
CREDIT Bond Prices Decline on Profit Taking Bond prices retreated after staging a powerful advance over the previous three sessions.
Analysts cited profit taking, the recent decline in the dollar and apprehension over an impending report on inflation at the consumer level for the pullback.
The Treasury’s benchmark 30-year bond fell 13/32 point, or $4 per $1,000 face amount, after rising more than 2 1/2 points over the last three sessions. Its yield, which falls when prices rise, edged up to 8.61% from 8.57% late Monday.
Analysts said the pullback in light dealings saw some traders cash in gains made in the market’s recent strong advance. They also said the dollar’s decline against the Japanese yen may have discouraged some investors from Japan from adding to their holdings of dollar-denominated notes and bonds.
But many traders stayed on the sidelines Tuesday in anticipation of the government’s scheduled report today on consumer prices in April.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.313%, up from 8.25% Monday.
CURRENCY Dollar Makes Gains in Quiet Trading The dollar firmed against most major currencies in light trading.
The currency market seemed to shrug off the industrial production report, dealers said.
They said attention is turned toward today’s consumer price report and Thursday’s March trade data for further indications of the direction of the U.S. economy and interest rates.
For Tuesday, dealers said the dollar’s strength came partly at the expense of other currencies, particularly the West German mark and British pound.
The mark remained under pressure, they said, following the surprisingly weak showing in recent state elections by West German Chancellor Helmut Kohl’s conservative party. Those results brought some uncertainty about the pending reunification with East Germany, dealers said.
The British pound fell against the dollar after Prime Minister Margaret Thatcher said she supported efforts by Chancellor of the Exchequer John Major to lower the current official interest rate of 15% by year’s end.
COMMODITIES Soybean Prices Fall for 3rd Straight Day Soybean futures prices fell sharply for the third straight day amid profit taking and speculative fund-selling prompted in part by signs that Brazilian soybean exports are closing the gap between world supply and demand.
On other commodity markets, grain futures fell; cocoa futures retreated; oil futures were mixed; precious metals were mixed, and livestock and meat futures were mixed.
Soybean futures settled 8 to 11.5 cents lower on the Chicago Board of Trade, with the contract for delivery in May down 10.25 cents at $6.1325 a bushel.
The decline extended to about 35 cents the drop in the May soybean contract’s price since Thursday, when the Agriculture Department released a report projecting rising U.S. soybean stocks.
Some analysts attributed the weakness to increased soybean exports, especially from Brazil, the world’s second-largest producer after the United States.
