STOCKS : Dow Falls 34.95 as Profit Takers Pace Selloff
Stock prices suffered their biggest drop in two weeks Friday, dogged for the fourth-straight day by profit taking after the Dow Jones industrial index jumped on Monday to an all-time high.
Soft bond prices and weakness in technology and retail stocks weighed on the entire market.
The Dow Jones index of 30 industrials dropped 34.95 to 2,862.38, finishing the week with a net loss of 38.59 points.
In the broader market, declining issues outnumbered advances by more than 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 458 up, 1,010 down and 523 unchanged. But Big Board volume was just 142.6 million shares.
Over the five preceding weeks the Dow had rolled up an advance of 255 points. Analysts said the enthusiasm built up in the market’s advance to record highs began to cool as prices pulled back a bit in the last few days. A rash of program selling also hurt prices Friday.
The upbeat mood was tempered by indications from the Federal Reserve that it wasn’t ready to adopt a more stimulative credit policy on the basis of a few months of sluggish economic growth.
Traders were also unloading stocks before next week’s key economic reports, including May producer and consumer price indexes and April trade numbers.
Financial stocks were mostly lower as enthusiasm about the interest-rate outlook waned. BankAmerica dropped 1/2 to 32, Security Pacific lost 1 5/8 to 41 1/8, and Wells Fargo dropped 1 1/4 to 82 1/2. But some S&Ls; were higher, including Downey Savings, up 3/4 to 19 1/2, and CalFed, up 3/8 to 20 3/4.
Retailers continued to decline, with Gap Inc. leading the group. Bear, Stearns & Co. trimmed its 1990 earnings estimates, citing Gap’s surprisingly low same-store sales increase of 6% last month. Gap dropped 2 3/8 to 56 1/8. Elsewhere in the group, Limited fell 1 1/8 to 46 1/4, Dillard Department Stores dropped 2 5/8 to 85 1/4, and Liz Claiborne lost 1 1/8 to 30 5/8.
Entertainment stocks were broadly lower on worries about summer movie releases. Disney gave up 4 7/8 to 123 3/8, Time Warner lost 2 7/8 to 107 3/4, and MCA dropped 1 3/4 to 56 3/4.
Some biotech and high-tech stocks, recent leaders, were slammed. Amgen lost 2 to 69 1/2, Compaq fell 2 5/8 to 119 1/8, and AST Research dropped 7/8 to 23 7/8.
Apple Computer’s stock fell 3/4 to 38 1/4 on a report that the company’s monitors may emit higher levels of radiation than other computer makers’ screens.
Rohr Industries rose 1 to 23 7/8 after an Alex. Brown analyst rated the stock a “buy,” citing improved earnings expectations for the aerospace firm.
In Tokyo, investors moved to the sidelines ahead of the weekend and the market closed lower. The Nikkei 225-share index lost 199.21 points to end at 32,993.29.
In London, the Financial Times 100-share index fell 11.8 points to close at 2,366.6. In Frankfurt, shares were off for the third consecutive day. The DAX index ended 15.20 points lower at 1,822.23.
CREDIT Bond Prices Slip in Light Trading Bond prices dipped in slim trading Friday as many traders stayed on the sidelines awaiting several government reports scheduled to be released next week.
The Treasury’s benchmark 30-year bond fell 5/32 point, or about $1.56 per $1,000 face amount, while its yield, which rises when prices fall, rose to 8.44% from late Thursday’s 8.42%.
Analysts said bond traders were just marking time as they waited for the figures that will provide clues on the direction of the economy and perhaps give some insight into the Federal Reserve’s plans.
Some analysts say favorable figures could reignite the price surge of June 1, when the Labor Department announced employment figures that signaled a weakening of the economy.
The federal funds rate, the rate banks charge each other on overnight loans, was quoted at 8.188%, down from 8.25% Thursday.
CURRENCY Dollar Is Stronger Against Pound, Yen The dollar finished stronger against most major currencies.
The dollar was stronger as investors anticipated next week’s economic reports. Many apparently felt the consumer price index and producer price index could show stronger inflation, which could lead to higher interest rates, said Robert Hatcher, corporate trader at Barclay’s Bank PLC in New York.
The dollar began its trading day in Tokyo, rising 0.10 yen to a closing of 152.65 Japanese yen. Later, in London, it also was quoted higher, at 153.48 yen, and in New York, it rose to 153.49 yen from 152.55 late Thursday.
In London, the dollar rose against the British pound, which was quoted at $1.6843, compared to $1.6880 late Thursday. In New York the pound also dropped against the dollar, falling to $1.6840 from $1.6895 on Thursday.
COMMODITIES Cocoa Futures Take a Tumble Cocoa futures were sharply lower on New York’s Coffee, Sugar & Cocoa Exchange amid widespread stop-loss selling.
On other markets, grain and soybeans were lower; livestock and pork futures were mixed; precious metals were mixed, and energy futures were higher.
The cocoa futures market opened moderately lower, following the London market’s lead, but regained some ground before plunging due to commission house selling.
Judith Ganes, an analyst for Merrill Lynch in New York, blamed a number of factors. She said the market rose recently because of concerns about the political climate in the Ivory Coast, a major producer of cocoa. She said unstable conditions there have eased, largely removing market concerns.
Also weighing on cocoa futures was the settlement of the Brazilian dock workers strike. Ganes noted that although the strike had not prompted a rally in the market, the settlement allowed the shipment of cocoa and gave those wanting to sell a reason to do so.
METALS
No Bottom in Sight for Gold--Analysts
Gold prices are headed lower, with no apparent signs of a halt to selling in sight despite this week’s free fall to 1986 lows, market analysts said Friday.
“There is no indication that the market has found a bottom, so we’re likely to continue to move lower,” said William O’Neill of Merrill, Lynch & Co.
He said the “ever-present threat” of sales by the Soviet Union, the world’s second-largest gold producer after South Africa, continues to keep the market on edge.
In addition, many traders fear Saudi Arabia has been selling large amounts of gold lately, leading to at least two sharp drops in recent weeks.
The gold market stabilized Friday, with the spot price in New York closing $1.10 higher at $355.70 an ounce on the New York Commodity Exchange, after tumbling $11 an ounce this week to the lowest since August, 1986, on talk of Soviet bullion sales.
At Republic National Bank of New York later, the metal was quoted at $355, up $1.40 from late Thursday.
Traders are also worried that any recovery in gold prices may attract aggressive selling by the Soviet Union.
