FINANCIAL MARKETS : STOCKS : Dow Falls 7.92 in Extremely Heavy Trading
Blue chips slipped in heavy trading Thursday after a brief, euphoric rally on new hints of a peaceful resolution to the Iraq crisis.
The Dow Jones industrial index, which had been up nearly 36 points early in the session, ended with a loss of 7.92 points at 2,602.48.
But in the broader market, advancing issues outnumbered declines by about 5 to 4 in nationwide trading of New York Stock Exchange-listed stocks, with 869 up, 710 down and 456 unchanged.
And Big Board volume soared to 256.38 million shares, the heaviest since a 416-million-share day on Oct. 16, 1989. Volume was fattened by institutional traders and computer trading programs.
Some analysts suggested that the volume surge, along with the market’s confused performance, are signs that something big is about to happen--either a sharp selloff or a powerful new advance.
The early rally was sparked by news that Iraqi President Saddam Hussein said all Western hostages would be freed. The report hammered oil prices and sent investors scrambling to buy stocks.
But investors later took profits after President Bush and Secretary of State James Baker reiterated that Iraq would have to withdraw from Kuwait.
“The market’s been taking some of the rhetoric on the Mideast a little too seriously,” said A. C. Moore, a market analyst at Argus Investment Management. “On a closer look, we saw that the period of (the hostage) release extends from Christmas to late spring.”
The Dow’s retreat was led by IBM and by bank stocks, which failed to sustain their Wednesday rally. Those weak spots in the market bolstered the position of the bears, who argue that investors soon will turn their sights from Iraq to the weakening U.S. economy, and that stocks once again will be dumped.
Among the market highlights:
* IBM tumbled 3 1/8 to 111 1/2. An S. G. Warburg analyst cited concern that a worldwide slowdown in capital spending would hurt the company’s first-quarter profit. The analyst, David Wu, said IBM had suggested that he stick with his full-year 1991 earnings forecast of $10.50 a share, even though the average analyst estimate is $11. That caught investors by surprise, and suggested IBM’s outlook is weakening.
* NCR jumped 6 1/8 to 92 3/4 on speculation that AT&T; may eventually sweeten its $90-a-share tender offer. AT&T; was flat at 30 1/8.
* In the financial sector, most bank stocks fell, after rallying sharply Wednesday on expectations of lower interest rates. BankAmerica dropped 7/8 to 25 1/4, Wells Fargo lost 1 3/8 to 58 1/8, Citicorp fell 7/8 to 14 7/8 and Republic N.Y. Corp. fell 3 to 47 1/8.
* Thousand Oaks-based Amgen dropped 2 1/4 to 53 3/4. A Kidder, Peabody & Co. analyst downgraded the biotech stock to hold from buy, citing worries about upcoming FDA hearings concerning one of the company’s new drugs.
* Oceaneering International fell 2 1/2 to 11 5/8 after an analyst expressed concern about pricing pressures for the company’s remotely operated oil-service vehicles in the North Sea. Oil and oil-service stocks in general plunged on growing belief that oil prices will drop significantly if the Mideast war threat dissipates. Arco fell 4 5/8 to 122 1/2, Chevron fell 1 1/4 to 69 3/4 and Amoco lost 1 to 50 3/8.
* Despite blue chips’ weakness, many smaller stocks in particular continued to rise. Among Southland issues hitting 52-week highs were House of Fabrics, up 1/2 to 31 1/8; Pinkerton’s, up 3/4 to 24, and AST Research, up 7/8 to 28 3/4.
In foreign trading, German shares, which rose sharply at the start of trade but drifted lower by mid-session, rocketed higher late in the session. The 30-share DAX index closed 33.71 points higher at 1,504.67.
Share prices also finished sharply higher after active trading on London’s Stock Exchange, boosted by the news that foreign hostages will be released from Iraq. The Financial Times 100-share index was up 24.9 points at 2,177.5.
Stock prices on the Tokyo Stock Exchange rallied, spurred by Iraq’s accepting a U.S. offer for high-level talks on the Persian Gulf crisis. The key Nikkei Average of 225 selected issues rose 359.38 points to 22,553.10. At midday today, the Nikkei was up another 562.10 points.
CREDIT Bond Prices Slip in Mixed Trading Bond prices slid in mixed trading, backing off earlier highs following the tough talk against Iraq by President Bush and Secretary of State Baker.
The treasury’s bellwether 30-year bond fell 3/16 point, or $1.88 per $1,000 in face amount. Its yield rose to 8.33% from 8.31% late Wednesday.
Long-term bond prices rose about 1/2 point after Hussein said he was prepared to free all foreign hostages. But the gains later were more than wiped out by what traders viewed as a hard line by Bush and Baker against Iraq.
The federal funds rate, the interest on overnight loans between banks, traded at 7.438%, up from 7.25% late Wednesday.
CURRENCY Hostage Release Plan Drives Dollar Down The dollar fell against most currencies, battered by Iraq’s plans to free hostages, but later recouping some ground as traders decided the Persian Gulf crisis was far from over.
In New York, the dollar ended at 1.488 German marks, down from 1.499 Wednesday. In particularly choppy trading, the U.S. currency closed at 132.14 Japanese yen, compared to Wednesday’s close of 133.63 yen.
COMMODITIES Metal, Energy Futures Decline The developments in the Persian Gulf crisis continued to control the direction of the precious metals and energy markets. They both lost ground as the rhetoric by world leaders waxed both conciliatory and bellicose.
Gold futures for February delivery plunged $4.10 an ounce in early trading before recovering.
On other markets, livestock and pork futures were mixed, and grains and soybeans were higher.
Gold settled $2.30 to $2.60 lower, with the contract for delivery in February at $373.20 an ounce; silver was 2.7 to 3.5 cents lower, with January at $4.13 an ounce.
Market Roundup, D6
