STOCKS : Dow Off 20.55; Economic Data Sinks Market
Poor economic reports and renewed worries about the Persian Gulf sent Wall Street stocks tumbling Friday.
The Dow Jones index of 30 industrials dropped 20.55 to 2,593.81, closing out the week with a net gain of just 3.71 points.
In the broader market, declining issues outnumbered advances by about 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 526 up, 1,025 down and 473 unchanged. Volume on the NYSE came to 150.88 million shares, down from 162.11 million in the previous session.
“It’s a sagging market based on sagging hopes for peace and sagging prospects for lower interest rates in the immediate term,” said Alan Ackerman, market strategist at Reich & Co.
The Federal Reserve said factory production in November tumbled 1.7%, its sharpest decline since January, 1982, while the Labor Department said wholesale inflation rose an unexpectedly strong 0.5%. “That was a double dose of deadly news,” said Allen Sinai, chief economist at Boston Co.
Investors were particularly concerned that the bad inflation figures would stop the Federal Reserve from lowering interest rates.
Stocks also were hit by comments from two Republican senators that President Bush was frustrated with the failure to arrange peace talks with Iraqi leader Saddam Hussein and was prepared to give up the initiative.
Later, Bush accused Hussein of stalling the U.S. effort to arrange peace talks.
“I think the bottom line is once again it suggests that a peaceful resolution, at this point, is not a certainty,” said Brad Turner, chairman of the investment policy committee at McDonald & Co.
Among the market highlights:
* Reflecting broad worries about the sinking economy, the Dow was weighed down by GM, off 1 to 33 1/4, IBM, down 1 5/8 to 111 1/4, Merck, off 1 1/2 to 86 5/8, and McDonald’s, down 3/4 to 29 3/8.
* Oil stocks rebounded a bit from their recent slump as Mideast war fears grew. Arco jumped 3 to 124, Unocal added 5/8 to 26 1/2 and Chevron inched up 3/8 to 69 3/8.
* Airline stocks were big losers on new fare-war fears. Delta fell 2 1/8 to 56 7/8, USAir lost 7/8 to 15 1/8 and AMR, parent of American, slumped 1 3/4 to 50.
* Security Pacific fell with most other bank stocks, off 7/8 to 21 1/8. Standard & Poor’s and Moody’s both downgraded the company’s debt, citing loan worries.
* Food and drug stocks, strong of late, lost ground. They were led lower by Gerber Products, which dropped 4 1/4 to 56 after a Morgan Stanley & Co. report said sales volume of Gerber’s baby food should remain flat for the second half of the fiscal year.
Also, drug firm Syntex lost 2 3/4 to 57 5/8 on investor disappointment with a recommendation by a panel of the FDA that a new stroke-prevention drug be approved for only a small patient base. Also, Medtronic fell 5 1/4 to 84 3/4. The company said it temporarily suspended test implants of a new heart device.
* Ashton-Tate plunged 1 3/8 to 6 1/4 after the firm lost a software copyright battle.
* Carolco Pictures rose 1 to 8 7/8 on reports that Chief Executive Peter Hoffman had secured an unspecified line of credit to buy Carolco common stock on the open market. Pioneer LDCA Inc. and Canal+ Productions, which have equity ownership in Carolco of about 10% and 5% respectively, have also been granted a waiver of their standstill agreements, which will permit them to each purchase up to an additional 1 million shares of stock in the open market.
In London, stocks fell from their highs and closed lower following a sharp drop on Wall Street. The Financial Times 100-share index ended down 3.8 points at 2,168.4, down 15 points for the week.
In a reversal of Thursday’s trading pattern, Germany’s 30-share DAX index moved higher after a disappointing start. The index finished 4.60 points higher at 1,522.40.
Share prices fell slightly in Tokyo. The 225-issue Nikkei average shed 293.47 points, or 1.2%, to close at 24,349.50.
CREDIT Bond Prices Slump on Inflation Report News of higher wholesale prices and troubles facing Middle East peace talks sent bond prices skidding for a second straight day.
The Treasury’s bellwether 30-year bond fell 25/32 point, or $7.81 per $1,000 in face amount. Its yield jumped to 8.18% from 8.12% late Thursday.
Traders said prices also were hurt by hawkish testimony by Defense Secretary Dick Cheney before a House Committee. Cheney said that if the economic attempts and diplomatic efforts to solve the Kuwait crisis fail, the United States must have the option of using force to oust Iraq.
The federal funds rate, the interest on overnight loans between banks, traded at 7.313% late Friday, up from 7.25% on Thursday.
COMMODITIES Silver, Platinum Futures Decline Silver and platinum prices fell on New York’s Commodity Exchange as the latest economic indicators pointed to a severe slump in the manufacturing sector.
“That makes for a very weak industrial future,” said analyst Jim Steel of Refco Inc. in New York. Because silver and platinum are heavily used in industry, news of further industrial production declines hurt.
Silver has been on a downward slide since the start of the year, as traders looked upon it increasingly as an industrial metal. A large percentage of silver is used by the film industry. It also is used by telecommunications companies and defense manufacturers.
Silver plummeted 6.9 to 7.7 cents, with the contract for delivery in December at $3.94 an ounce--lowest since 1974. Platinum was $2.30 to $3 lower, with January at $412.20 an ounce.
Gold futures moved in the opposite direction, supported by a surge of oil prices early in the day. Gold was $2.40 to $3.30 higher, with December at $376.70 an ounce.
Crude oil futures gave up much of a $1.68 early gain in a late retreat, as President Bush was less aggressive than expected in discussing the gulf crisis during an afternoon news conference.
CURRENCY Dollar Edges Up in Light Turnover The dollar rose slightly amid the nervousness over the Persian Gulf crisis, but trading was quiet.
In New York trading, the U.S. currency rose to 1.482 German marks from 1.479 on Thursday. It also rose to 132.85 Japanese yen from 132.17.
The British pound fell to $1.9370 from Thursday’s $1.9450.
Market Roundup, D6
