STOCKS : Key Blue Chips Take a Hit; Dow Off 13.86
The stock market fell modestly Wednesday, depressed by drops in several high-profile stocks, dwindling hopes of an interest rate decline and further delays in a U.S. budget agreement.
The Dow Jones industrial index lost 13.86 to 2,557.43. In the broader market, declining shares led gainers 888 to 573 on New York Stock Exchange volume of 147.5 million shares, compared to 141.1 million Tuesday.
The market’s decline was surprisingly restrained in the face of bad news, analysts said, indicating selling pressure may be waning. “What you’re seeing is healthy,” argued Alan Newman, technical analyst at HD Brous & Co.
“The market has demonstrated surprising resilience,” agreed Monte Gordon, director of research at Dreyfus & Co.
The Dow fell early in the day after Federal Reserve Chairman Alan Greenspan hinted that credit policy would remain tight for now. He said inflation remains a problem and is likely to remain stubborn because of increases in oil prices.
“Greenspan’s comments weren’t very favorable, even though he didn’t say anything that was not already known,” said James Wright, chief investment officer at Banc One Asset Management.
Adding to the gloomy mood was a comment from House Speaker Thomas Foley, who predicted that negotiators wouldn’t reach agreement on cutting the huge federal budget deficit until at least the middle of next week.
But if a pact is reached, Newman believes that a rebound in the market could be explosive, more Persia Gulf turmoil notwithstanding. “I think there’s probably a 200-point move,” he said.
Among the market highlights:
* The Dow’s small loss was surprising considering the beatings taken by some key component stocks. Merck plunged 3 1/8 to 76 7/8 after Vector Securities, a specialist in health-care stocks, lowered its long-term profit growth projection for Merck to a 15% annual rate, from 18%. The downgrade came after Vector decided Merck’s new prostate drug won’t be a blockbuster.
GE tumbled 2 1/2 to 56 1/8. The company was hurt by concerns that its FGIC muni bond insurance unit could suffer in a recession. A rival insurer, MBIA, slumped 3 3/8 to 28 1/2 on worries about its exposure to City of Philadelphia bonds.
Meanwhile, financial services firm Primerica continued to slide, falling 1 7/8 to 21 1/4 after losing 2 5/8 Monday, on worries about its consumer finance operations.
* Among major banks, Chase Manhattan slumped 1 1/8 to a new 11-year low of 13 7/8 on fears about its financial health. Citicorp fell 1/2 to 17 1/4 and First Chicago dropped 5/8 to 19 3/4.
* Renewed selling also hit the S&Ls;, as CalFed fell 3/8 to 6, Great Western lost 7/8 to 13 1/8 and Golden West dropped 7/8 to 23 7/8.
* Some battered high-tech stocks showed strength. IBM’s rise of 1 1/8 to 108 3/8 helped support the Dow. Compaq gained 1 1/4 to 44 3/8, Stratus rose 1 1/8 to 18 3/8 and Intel rose 3/8 to 33 7/8.
* Aluminum stocks heated up again, on expectations of tight supplies. Reynolds Metals rose 1 1/8 to 70, an all-time high. Alcoa, a Dow stock, gained 1 3/4 to 69 7/8, and Maxxam rose 1 1/4 to 66 1/2.
* Disney tumbled 3 3/4 to 90 3/8, a new 52-week low, after Wertheim Schroder cut its 1990 and 1991 earnings estimates, citing theme-park attendance concerns. Wertheim estimates 1991 earnings will be $6.85 a share, down from a previous estimate of $7.10.
* Occidental lost 1 3/8 to a new 52-week low of 21 3/8 despite reiterating that rumors of an upcoming dividend cut are false. Other oils were mixed. Arco fell 1 3/8 to 140 7/8 and Oryx lost 2 5/8 to 49 1/4, but Amoco gained 5/8 to 59 and Louisiana Land jumped 1 to 52 1/2. Natural gas stocks continued to drive ahead. Columbia Gas gained 1 1/8 to 52 and Consolidated Natural Gas added 7/8 to 52, a new high.
In Tokyo, stocks closed down again, with the benchmark Nikkei index slumping 158.65 to 23,726.17 in thin volume. Early today, the Nikkei lost another 231 points.
In London, shares ended slightly up but off their highs. The Financial Times 100-share index closed 1.8 points higher at 2,065.8.
In Frankfurt, West Germany, stocks were driven to their lowest levels since East Germany opened its borders to the West last November, weighed down by worries about the Persian Gulf crisis and the cost of German unification. The 30-share DAX index ended down 19.73 to 1,487.54, lowest since 1,462.96 on Nov. 9.
CURRENCY Dollar Surges in Heavy Trading The dollar rebounded strongly against European currencies in heavy trading fueled by Fed Chairman Greenspan’s comments about a continuation of tight credit.
A dollar bought 1.571 German marks late Wednesday in New York, up sharply from 1.552 marks Tuesday. But against the Japanese yen the dollar fell to 137.50 from 137.90.
“It looks like the Fed would like to ease but can’t because of inflation and would like to tighten but can’t because of recession fears. That supports the status quo,” said Belal Khan, a dealer at Fuji Bank.
CREDIT Bond Prices Rise Despite Fed View Most government bond prices gained after traders shrugged off disappointment that rising inflation might delay a fall in interest rates.
But short-term interest rates bobbed up because of diminished expectations of an imminent ease in Federal Reserve monetary policy.
The market’s benchmark issue, the 30-year Treasury bond, jumped 9/16 point, or about $5.57 per $1,000 face amount. Its yield sank to 9% from 9.05% late Tuesday.
The federal funds rate, the interest banks charge one another for overnight loans, was quoted at 7.75%, compared to 7.50% late Tuesday. The rate reached as high as 11% on Wednesday after touching down to 6.25% on Tuesday, in what analysts described as technical fluctuations.
COMMODITIES Grain, Soybeans Fall on Weather Report Grain and soybean futures prices fell sharply on the Chicago Board of Trade as fears of weekend frost in the Midwest melted away.
On other commodity markets, cotton futures soared, livestock and meat futures were mixed, energy futures were mixed and precious metals fell.
In Chicago, wheat futures settled 4 to 5 cents lower, with the contract for delivery in December at $2.6925 a bushel; corn was 3.75 to 4.50 cents lower, with December at $2.2225 a bushel; and soybeans were 9.25 to 15.75 cents lower, with November at $6.1775 a bushel.
Gold futures extended their recent losses on New York’s Commodity Exchange amid profit taking. September gold settled off $1.60 to $386 an ounce; September silver lost 2.1 cents to $4.77.
Market Roundup, D8
