STOCKS : ‘Waiting Game’ Stalls Advance; Dow Slips 17.08
Wall Street’s three-day winning streak ran out of steam Tuesday as bonds eased and oil prices rose, scaring off investors already wary about this week’s record Treasury auction.
The Dow Jones industrial index fell 17.08 to 2,485.15.
In the broader market, declining issues outnumbered gainers by about 10 to 9 on the New York Stock Exchange, with 709 up, 760 down and 510 unchanged.
Big Board volume totaled 141.13 million shares, down from Monday’s 147.51. Volume was light as caution over congressional elections and the reception of this week’s massive Treasury offering of notes and bonds pushed some players to the sidelines.
“I think this market is reacting to a waiting game as far as the election is concerned and the long-range Treasury auction,” said Gene Jay Seagle, director of technical research at Gruntal & Co.
The Treasury’s three-year note sale--the first leg of a record $34.25-billion auction this week--was warmly received, but investors were taking a wait-and-see attitude before the 10- and 30-year sales today and Thursday.
“There are no super-negatives out there,” said Ron Doran, institutional trading chief at C. L. King & Associates. “But I did see some institutions on the sell side today.”
Disappointing financial reports from several companies, including Browning-Ferris and Circuit City Stores, triggered large declines in the stocks on heavy volume. Even so, many investors continue to look for some hope that the broad market will turn around soon--despite the apparent deepening recession. Many analysts say such hopes are probably unrealistic.
“My guess is that we will, by the end of the year, see lower stock prices and more disappointing earnings reports,” said John McElroy, principal of 1838 Investment Advisors L.P.
Oil prices recovered some ground from Monday’s slide, with the December contract rising 67 cents to $32.63 a barrel on the New York Mercantile Exchange.
Among the market highlights:
* Browning-Ferris tumbled 6 to 24 1/4 after the company unexpectedly announced a writeoff and a slowdown in business in key markets. Other weak environmental stocks included Waste Management, down 2 to 33, and Laidlaw, off 3/4 to 17. But Rollins Environmental closed unchanged at 8 1/8 and Zurn gained 1/4 to 32.
* Aluminum stocks were pressured by concerns about rising inventories of the metal. Reynolds Metals dropped 2 1/8 to 51 7/8, Alcoa lost 1 to 53 and Maxxam dropped 2 1/8 to 31 5/8.
* Circuit City plunged 3 to 11 1/4 after reporting disappointing same-store October sales, prompting negative comments from several Wall Street analysts. Same-store sales fell 7% for the month.
* Wholesale Club jumped 4 to 19 3/4 after Wal-Mart offered $21-a-share for the company. Wal-Mart fell 5/8 to 27 3/4. Meanwhile, Warehouse Club added 1/8 to 1 after A&P; said it will take a 51% stake.
* MCA closed up 1 5/8 at 63 3/8. It was the fourth-straight gain for the stock, as merger talks continue between it and Matsushita.
* Unisys fell 1/8 to 2 3/4 amid concern that it may have to sell assets at distressed prices.
* McDonnell Douglas rose 1 3/4 to 51 3/8. Analysts said the company’s new MD-11 jetliner is scheduled to win certification by the Federal Aviation Administration this week. Among other defense issues, Lockheed jumped 1 3/8 to 29 1/4.
After opening firmer, German share prices slid steadily throughout the session to close below the psychologically important 1,400-level on the 30-share DAX index for the first time in a month. The key index fell 16.71 to 1,398.24.
In London, the Financial Times-100 share index gained 19.7 points to 2,069.80.
In Tokyo, stocks closed lower after a day of thin trading. The 225-share Nikkei average dropped 419.58 to 23,965.75. By midday today, the Nikkei had lost another 439.77 points.
CREDIT Flood of Issues Cuts Into Prices of Bonds Government bond prices slipped slightly as the market faced an onslaught of new securities, although investors snapped up the first issues.
The Treasury’s bellwether 30-year bond fell 1/8 point, or $1.25 per $1,000 in face amount. Its yield rose to 8.63% from 8.62% late Monday.
The Treasury’s new three-year notes sold well Tuesday, yielding 7.78%. But supply concerns grew as the Treasury said it will auction about $20 billion in short-term bills next week, up from $19.6 billion sold at Monday’s weekly auction.
The federal funds rate, the interest on overnight loans between banks, traded at 7.688%, down from 7.938% late Monday.
In the tax-exempt market, the bond buyer index of 40 actively traded municipal bonds rose 1/8 point to 90-1/32 point. The average yield to maturity fell to 7.62% from 7.63% late Monday.
CURRENCY Traders Shore Up Positions; Dollar Up The dollar rebounded Tuesday on concerns about the Persian Gulf and on technical buying by traders adjusting their positions before results of the day’s elections.
Currency traders bought dollars aggressively on news that the United States might send more troops to the Middle East and on speculation about unrest in the Soviet Union.
The Marine Corps said it was calling up more than 600 reservists from eight states for combat roles in the Persian Gulf. Meanwhile, clashes continued among several ethnic groups in the Soviet Union.
The dollar tends to rise in times of political uncertainty overseas, because it is generally seen as a relatively safe investment. Furthermore, crude oil is bought and sold in dollars, so if an outbreak of war in the Middle East sends oil prices skyrocketing, there would be more demand for the dollar.
In addition, analysts said traders were buying dollars to hedge their positions pending the outcome of Tuesday’s elections, with its potential to redistribute political power by carving up key election districts. “Just that uncertainty makes people cover up their short positions,” said Karen Gibbs, analyst at Dean Witter Reynolds.
In earlier overseas trading, the dollar was little changed because of market fears of a U.S. recession and anticipation of subsequent cuts in U.S. interest rates.
A reduction in interest rates dampens demand for U.S. investments and therefore sends the dollar down.
In New York, the dollar ended at 1.493 German marks, up from 1.486 Monday, when it hit a record low of 1.483 marks. The dollar also rose against the Japanese yen, closing at 128.15 yen, up from Monday’s 126.55.
COMMODITIES Metals Rise on Fear of Mideast Conflict The heightened fears of war in the Middle East spurred a rally in precious metal markets Tuesday.
On other commodity markets, oil futures rose; pork futures soared, helping to lift the cattle markets; soybeans hit an eight-month low, and grain futures were mixed.
Gold futures settled $7 to $7.40 higher on New York’s Commodity Exchange, with the contract for delivery in December at $388.10 an ounce; silver was 3 to 3.2 cents higher, with December at $4.25.
Platinum futures finished $6.10 to $10.20 higher on the New York Mercantile Exchange, with November at $426.80 an ounce.
Analysts said speculation is mounting that the U.S.-led multinational military force in Saudi Arabia will soon attack Iraqi troops in occupied Kuwait.
World oil prices rebounded sharply on war worries and in a technical move after the prior day’s plunge. On the New York Mercantile Exchange, light sweet crude for December delivery rose 67 cents to end at $32.63 a barrel. Market Roundup, D6
