STOCKS : Dow Falls 3.96 After Morning Rally Fizzles
Blue chip stock prices fell slightly Monday after a run-up in oil prices spurred a late afternoon burst of selling on Wall Street and erased earlier gains.
The Dow Jones industrial index closed down 3.96 points at 2,615.59. In the broader market, however, advancing shares outpaced losers by a narrow margin of 759 to 726.
Big Board volume remained light, with 119.7 million shares changing hands, compared to 123.8 million on Friday.
Oil prices surged in the afternoon on rumors that Iraqi troops were heading toward Jordan. The rumors were later denied by U.S. officials but not before October crude rose $1.26 to close at $31.30 a barrel in New York.
At one point early in the day, crude had lost nearly $2 and the Dow index was up 35 points.
Aside from oil, investors were concerned that little progress was reported from marathon weekend talks on cutting the federal budget deficit. The White House said the Bush Administration did not expect to reach a budget agreement with Congress soon.
The combination of worry about the Middle East and the weak U.S. economy spells trouble for stocks, analysts say. “I think we’re going down further, and that in a week or so, we’ll take another look at the August lows,” said Alfred Goldman, analyst at A. G. Edwards & Sons, in St. Louis.
Among the market highlights:
* Gold stocks tumbled as the price of the metal dropped. ASA fell 2 to 47, Newmont Gold lost 1 7/8 to 43 1/8, and Echo Bay fell 3/4 to 12 1/4. Oil stocks, meanwhile, were mixed as oil had another roller-coaster day. Arco lost 1 3/8 to 137 1/8 and Unocal dropped 7/8 to 32 1/2, but Tosco added 1/8 to 21 1/4 and Unocal Exploration rose 3/8 to 16.
* UAL Corp. closed up 2 at 102 1/4 after trading as high as 106 3/8 in fairly brisk trading. The rise was based on rumors--first making the rounds on Friday--that Los Angeles investor Marvin Davis might finance a new bid for the parent of United Airlines with profits from the sale of his famous Pebble Beach golf resort.
* Toys R Us continued to fall on worries about slowing retail sales. It lost 1 to 22 1/8, a 52-week low.
* Investors moved back into some recently battered growth issues, including Conner Peripherals, up 1 1/4 to 23 1/2, Dreyer’s Ice Cream, up 1 7/8 to 39 1/8, and retailer Wet Seal, up 1 3/4 to 13 3/4. The NASDAQ composite index of over-the-counter stocks rose 1.35 to 381.73 for the day, bucking the Dow’s decline.
* Cable-TV stocks, long depressed, were little changed despite House approval of a bill bringing cable regulation back under federal control. Tele-Communications inched up 1/8 to 11 1/4, Cablevision added 1/4 to 17 1/4 and Viacom slipped 1/8 to 18 3/8.
* Some Southland stocks highlighted at the annual Montgomery Securities conference in San Francisco gained. Mattel rose 5/8 to 19 1/4 after its chief said the company sees strong international growth offsetting slower domestic growth. Optical Radiation jumped 1 1/8 to 30 3/4 after reporting income from continuing operations of 58 cents a share in the latest quarter, ahead of analyst estimates. Sales rose 22%.
* McDonnell Douglas jumped 1 1/8 to 48 3/4. The firm will record a one-time gain of $234 million related to the over-funding of its pension plan.
In Tokyo, stocks closed sharply higher with the benchmark Nikkei average charting its sixth-largest gain in history. However, the action came on thin volume. The Nikkei jumped 1,118.83 points, or 4.7%, to 25,080.90 after gaining 150.16 on Friday.
The London Stock Exchange took heart from sharp gains on Tokyo and in early trading on Wall Street, along with a larger-than-expected drop of 1.6% in Britain’s August retail sales. The Financial Times 100-share index closed 24.1 points higher at 2,147.
West German shares advanced in moderate trading but dealers remained far from convinced that a new positive mood was entering the market. In Frankfurt, the DAX 30-share index ended up 37.52 points at 1,600.45.
CREDIT Bond Prices Drop in Light Trading Treasury bond prices fell in light trading as oil prices rose and investers grew pessimistic about an early resolution to federal budget negotiations, traders said.
The bellwether 30-year Treasury bond fell 1/2 point, or $5 per $1,000 face amount. Its yield, which moves in the opposite direction from price, rose to 8.96% from 8.91% late Friday.
As with stocks, bonds tracked the seesaw in oil prices. Bond investors fear signs of inflation, such as rising oil prices, because inflation erodes the value of such fixed-return investments.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 7.938%, down from 8% on Friday.
CURRENCY Investors Put Money in Strengthened Yen The dollar rose against most major currencies, but it was the Japanese yen that dominated foreign exchange trading.
Analysts said the yen, which fell sharply in recent weeks as tensions continued in the Persian Gulf, regained strength following the Bank of Japan’s decision Aug. 30 to raise its discount rate.
The recovery on the Tokyo Stock Exchange has raised interest in Japanese investments, and traders who had placed their money into currencies such as the British pound recently were now turning to the yen, said James T. McGroarty, a senior vice president with Greenwich Capital Markets.
The dollar was higher against all major currencies except the yen Monday, but “it’s more of an individual currency assessment rather than an overall dollar view,” McGroarty said.
In New York, the dollar fell to 139.52 yen from late Friday’s 140.10. But against the German mark, the dollar jumped to 1.582 from 1.568 on Friday.
The British pound fell sharply against the dollar, closing at $1.858 in New York, compared to Friday’s $1.893.
COMMODITIES Gold, Silver Futures Turn Sharply Lower Precious-metal futures prices tumbled, reflecting a stronger dollar and pronounced weakness in the oil market for most of the day.
On other commodity markets, copper futures sank, grains and soybeans were mixed and livestock and meat futures advanced.
On New York’s Commodity Exchange, gold futures settled $10.90 to $12.60 lower, with the contract for delivery in September down $10.90 at $378.60 an ounce; silver for September finished at $4.75, off 4.5 cents.
Platinum futures ended $24.30 to $24.80 lower on the New York Mercantile Exchange, with September at $455.40 an ounce.
Copper futures followed gold and silver lower on the Commodity Exchange. Copper gave back more than a quarter of Friday’s gains, which had pushed the market to its highest level in nearly a year.
Market Roundup, D10
