STOCKS : Market Dips as Investors Take Profits
Stocks lost ground Tuesday on profit taking after the big gains of the previous two sessions, when the market hit record highs.
The Dow Jones industrial index of 30 blue chip stocks fell 10.19 to 2,925.00, returning about one-third of the Monday gain that put the key market barometer at a record 2,935.19.
Analysts attributed the drop to profit taking, sharply lower oil prices and a weaker bond market. But they said the decline didn’t appear to dampen the enthusiasm in the market’s spring surge.
“I think it’s a natural consequence of a straight-up move we’ve had here for three weeks,” said Dudley Eppel, trader at Donaldson, Lufkin & Jenrette Securities Corp.
Declining issues edged out advancers in nationwide trading of New York Stock Exchange-listed stocks, with 774 up, 813 down and 463 unchanged. Big Board volume rose to 199.72 million shares, up from Monday’s 175.52 million.
Some market participants said the decline was most likely just a pause. “This market is very reluctant to come down,” said Jack Solomon, analyst at Bear, Stearns & Co. “There’s a certain buoyancy here. Even as we correct one area, another area can act well.”
Oil and oil-services stocks were battered by a drop of 46 cents per barrel in the July contract of West Texas Intermediate crude. Baker Hughes dropped 2 to 27 5/8, Halliburton tumbled 2 3/4 to 46 1/4 and Atlantic Richfield fell 3/4 to 118 1/4.
Some high-tech stocks were hit by profit taking, including Microsoft, off 3 5/8 to 73 3/8, Cadence Design, down 1 5/8 to 25 3/4, Intel, down 1 3/8 to 47 1/8, and Teradata, off 1 1/4 to 26 3/4.
Financial stocks generally were higher, continuing a recent rally. Airline stocks also advanced, as oil dropped. AMR gained 1 3/8 to 68 7/8 and Alaska Air rose 3/4 to 24 3/8.
In Tokyo, the 225-issue Nikkei index lost 3.75 points, ending the day at 32,921.62. Share prices ended slightly higher on London’s Stock Exchange after volatile, heavy trading. The Financial Times 100-share index closed up 1.1 points at 2,380.1. In Frankfurt, the DAX index jumped 19.7 points to 1,876.69.
CREDIT Bonds Fall on News of Lower Oil Prices Bond prices fell as investors sold securities to cash in profits after a morning rally.
The Treasury’s bellwether 30-year bond fell 5/16 point, or $3.13 per $1,000 face amount, in light to moderate trading. Its yield, which rises when prices fall, increased to 8.45% from 8.42% late Monday.
Treasury bonds gained ground early on reports that Saudi Arabia planned to cut the price of crude oil to dealers in Europe and North America, said Kevin Flanagan, economist at Dean Witter Reynolds. Such a move would be good for the bond market because it would contribute to reducing inflation. But the rally faded.
The federal funds rate, the interest rate that banks charge each other on overnight loans, was quoted at 8.25%, unchanged from Monday.
CURRENCY Dollar Slips Over Interest Rate Fears The dollar ended mostly lower in worldwide trading, reflecting continued concern about the direction of interest rates.
Currency dealers said worries about the effects of a reunified Germany were supporting the dollar, but that was being overridden by interest rate fears.
Recent reports showing sluggish economic growth have some dealers worried that the Federal Reserve might be loosening its credit grip, they said. Lower interest rates often depress a currency.
COMMODITIES Grain, Soybeans Gain Some Ground Grain and soybean futures were mostly higher Tuesday on the New York Mercantile Exchange, while precious metals climbed, copper rallied, and livestock and pork futures rose sharply.
Grain futures prices were higher and soybeans were mixed on the Chicago Board of Trade, with corn futures sharply higher as planting continues to lag.
The U.S. Department of Agriculture issued a report at the close of trading Monday that said planting of the corn crop was 88% complete as of Sunday. That is less than expected, taking into account that there were several days of clear weather last week, said Joel Karlin, an analyst with Research Department Inc. in Chicago.
