STOCKS : Dow Falls 5.94 Despite Upbeat Budget News
Stocks fell Monday as concern over the Persian Gulf crisis and weaker bond prices outweighed optimism over the budget package and expected lower interest rates.
The battered banking group once again suffered some of the day’s most notable losses, even as the Federal Reserve apparently eased credit slightly.
Blue chips slid for the third session in a row, with the Dow Jones industrial index closing down 5.94 points at 2,430.20. The 30-share index has fallen 74.01 points since last Thursday.
The broad market also took a hit, with declining issues outnumbering advances by more than 2 to 1 on the New York Stock Exchange. There were 486 issues up, 1,037 down and 451 unchanged. Big Board volume was 133.98 million shares, up from Friday’s 130.19 million.
The $500-billion deficit-reduction package, finally approved by Congress after five months of wrangling, was positive, but “everyone expected it, so it was a non-event,” said Jeffrey Kaminsky, Mabon Nugent’s director of institutional sales.
The market took numerous turns throughout the day, with the Dow up more than 20 points and down more than 20 points at various times. The seesawing suggests investors have no conviction, and that patience overall is wearing thin, some analysts say.
Among the market highlights:
* It was just another bloody day for financial stocks of all kinds as investors again showed that they see serious problems ahead for the banking system. The pessimism was undaunted even as the Federal Reserve poured money into the system, letting interest rates fall.
The Standard & Poor’s financial stock index plunged 2.7% for the day. Wells Fargo led the banks lower, falling 2 3/4 to 45 1/8. Security Pacific dropped 7/8 to 17 3/4, a new 52-week low. First Interstate lost 1 to 17 1/8, also a new 52-week low.
Other losers included Mellon Bank, off 7/8 to 18 1/8, Banc One, down 1 1/4 to 19 1/4 and Bank of New York, down 1 5/8 to 14 1/2.
* Among the S&Ls;, CalFed plunged 7/8 to 3, a loss of 23%. Ahmanson fell 1/2 to 11 1/2 and Glenfed dropped 5/8 to 6 1/8. Home builders also were weak, including J. M. Peters, off 5/8 to 1 5/8.
* Brokerages and insurers tumbled with the banks. CNA Financial dropped 2 7/8 to 50 3/8, Aetna lost 1 to 30, Merrill Lynch fell 7/8 to 16 3/4 and Paine Webber slumped 1/2 to 11 7/8.
* Media and entertainment stocks were particularly weak. Disney lost 2 1/8 to 90 7/8, Time Warner fell 2 5/8 to 69 1/4, Times Mirror dropped 1 1/4 to 21 3/4 and Knight Ridder fell 5/8 to 37. Viacom class B lost 1 3/8 to 14 3/8 after the company said its quarterly profit did not indicate a long-term turnaround.
Playboy class A lost 1 1/8 to 3 1/4 on word that a major investor was liquidating his position.
* Profit taking was heavy in health-care stocks. Lilly fell 1 7/8 to 71 1/8, Abbott dropped 1 5/8 to 41 1/4, Humana lost 1 1/4 to 42 1/4, and Amgen gave up 1 1/8 to 44 5/8.
Tokyo stocks closed higher, with buying of cash indexes by futures arbitragers accounting for the bulk of the day’s gains. The key 225-share Nikkei index rose 323.67 points, or 1.3%, to 25,329.31.
German share prices dived at the opening on Gulf fears and reports of weak earnings at Volkswagen and Deutsche Bank. But they drifted higher on bargain-hunting later. The 30-share DAX index ended 2.56 points lower at 1,454.49.
Stocks finished mixed after light trading in London. The Financial Times-Stock Exchange 100-share index lost 1 point to 2,062.1.
CREDIT Fear of Bond Glut Offsets Fed Easing Bond prices fell sharply as traders shrugged off an apparent easing of credit by the Federal Reserve and focused on what they feared would be an oversupply of Treasury issues.
The price of the Treasury’s bellwether 30-year bond tumbled 5/8 point, or about $6.25 per $1,000 in face amount. Its yield surged to 8.83% from 8.77% late Friday.
Analysts said the market was anticipating a Fed move on rates after the weekend passage of the federal budget package. The Fed had made an easing of credit contingent on the measure’s passage.
The Fed move was apparent in a fall in the federal funds rate--the rate banks charge each other for overnight loans--to 7.75% from about 8% Friday. The Fed directly influences that rate as it pumps money into the system or drains it.
But analysts said the Fed action was such an anticlimax that it failed to move the market. Scott Winningham, a bond analyst with Stone & McCarthy Research, said the market was more concerned about supply.
The Treasury will announce later this week how many bonds it will be selling in its quarterly refunding auction, scheduled for next week. The government’s borrowing needs are expected to be near record levels. If too many bonds are available, their prices will have to drop to attract buyers, and interest rates will jump.
CURRENCY Dollar Ends Mostly Higher in Dull Day The dollar settled mostly higher on world currency markets, but traders said dealings were dull.
Traders said that, despite the advance, the dollar remained within its current trading range. With no fresh news to direct trading, “there was no reason to sell and no reason to buy,” said Robert Ryan, a trader at Bank of New York.
In New York, the dollar closed at 1.522 German marks, up from Friday’s 1.513. It rose to 128.65 Japanese yen from 128.25 Friday. The British pound fell to $1.949 from Friday’s $1.956.
COMMODITIES Oil Prices Rise as Peace Hopes Fade Oil prices shot up more than $1 per barrel on the New York Mercantile Exchange as traders expressed concern over the apparent failure of Soviet diplomatic efforts in the Persian Gulf.
On the New York Mercantile Exchange, the benchmark West Texas crude for December delivery ended the day up $1.67 over Friday at $34.68 a barrel.
On other commodity markets, hog and pork belly futures plunged their daily limits, copper retreated and grains and soybeans were mixed.
On New York’s Commodity Exchange, gold futures ended $2.10 to $2.80 higher, with October at $373.70 an ounce. October silver jumped 7.7 cents to $4.13 an ounce.
Market Roundup, D10
