FINANCIAL MARKETS : STOCKS : Dow Dips 0.71 as Three-Day Rally Fizzles
Blue chip stocks snapped a three-session winning streak in the final minutes of trading Thursday, ending down fractionally from their record high the day before.
The Dow Jones index of 30 industrials, which had reached new closing peaks in each of the week’s first three sessions, slipped back 0.71 to 2,855.55.
In the broader market, declining issues slightly outnumbered advances in nationwide trading of New York Stock Exchange-listed stocks, with 725 up, 791 down and 519 unchanged.
Stocks traded within a narrow 18-point range throughout the day, seesawing between gains and losses, with little to solidify the market’s direction.
Traders said profit taking held sway after the record highs of the past sessions. Some investors stayed out of the action ahead of the long Memorial Day weekend, accounting for the mild volume during the session.
As the business day began the Commerce Department reported that the gross national product grew at a 1.3% annual rate, after adjustment for inflation, in the first quarter of the year.
The reduction in the figure, from a previous estimate of 2.1%, was larger than most analysts had been estimating.
But the significance of the numbers was clouded by word that the difference stemmed to a great extent from a downward revision of business inventories rather than final sales.
A shrinkage in inventories can be interpreted not as a clear sign of economic weakness, but rather as a possible portent of an approaching pickup in production demand.
Philip Morris led the NYSE active list, down 1 at 44 1/8. Brokers cited a federal regulator’s push to ban cigarette vending machines as well as news that City University of New York and Harvard University had decided to sell their tobacco stocks.
Gainers among the blue chips included McDonald’s, up 1 at 35 1/8; Eastman Kodak, up 7/8 at 41 1/2; Westinghouse Electric, up 7/8 at 35 5/8; Boeing, up 1 1/2 at 82 5/8, and Coca-Cola, up 1/2 at 45 3/8.
Motorola climbed 3 3/4 to 83 3/4. The company’s cellular telephone technology business got two boosts in Japan with an order for equipment and the selection of its speech decoder as an industry standard in that nation.
U.S. Shoe, which reported sharply higher quarterly earnings, climbed 1 to 24 1/2.
Compaq Computer slipped 7/8 to 122 after trading at a new high of 124. The company plans a 2-for-1 stock split.
Big Board volume declined to 155.14 million shares from Wednesday’s 172.33 million.
Stocks jumped in Tokyo before the close as the release of good corporate results lured a flood of investors off the sidelines. The 225-share Nikkei index rose 135.24 points to close at 32,311.75.
In London, the stock market closed lower after Wall Street was hit by an early rash of profit taking. The Financial Times 100-share index closed 10.3 points down at 2,277.1.
The West German financial markets were closed for Ascension Day.
CREDIT Bond Prices Drop in Wake of Auction The bond market gave ground after giving a chilly reception to the government’s auction of $8.5 billion in five-year notes.
The Treasury’s benchmark 30-year bond lost 7/16 point, or about $4 for every $1,000 face amount. Its yield, which rises when prices fall, advanced to 8.61% from 8.57% late Wednesday.
Market watchers said bidding was unusually weak for the new five-year Treasury notes.
“It was not that well bid,” said Maury Harris, an economist for Paine Webber Inc.
Some analysts blamed the slow pace of the continuing talks between the White House and Congress on reducing the federal budget deficit and the prospect that the government may have to borrow much more than expected to bail out the nation’s thrifts.
“It made people realize that you’ve got plenty more coming,” said Elizabeth Reiners, a money market economist for Dean Witter Reynolds Inc.
Earlier in the session, bond prices posted some modest gains in the wake of the government’s latest estimate of first-quarter economic growth.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.313%, up from 8.25% late Wednesday.
CURRENCY Dollar Gains on Official’s Remarks The dollar rose against most currencies after remarks by a U.S. Treasury official that the currency was probably undervalued except against the Japanese yen.
The comment, by U.S. Assistant Secretary for Economic Policy Sydney Jones in a speech in Chicago, pumped life into what was otherwise a slow market.
Activity was dampened by the Ascension Day holiday closing of major European centers and the approach of the Memorial Day holiday in the United States on Monday.
The dollar closed at 150.90 Japanese yen, down from 151.25 on Wednesday and at 1.6840 West German marks, against Wednesday’s 1.6760.
COMMODITIES Gold Prices Stage Modest Recovery Gold prices staged a small rebound after a steep tumble in the previous session, but traders cautioned that a full recovery would take time.
On other commodity markets, cocoa prices advanced; energy futures were mixed; livestock and meat were mixed, and grains and soybeans were mixed.
On the Commodity Exchange in New York, gold rose $2.40 an ounce to settle at $366.50 after tumbling $11.50 on Wednesday.
Analysts attributed the rebound to bargain hunting after Wednesday’s plunge to seven-month lows, which was fueled by a Saudi Arabian sale of an estimated 600,000 to 800,000 ounces of the metal.
Gasoline futures surged, though, reflecting strong demand ahead of the driving-intensive Memorial Day weekend.
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