STOCKS : Market Stymied Over Iraq; Dow Falls 13.36
Stocks slid for the fifth straight session Tuesday, battered by investors fretful about the direction of events in the Mideast.
The fall came despite an apparent lowering of interest rates by the Federal Reserve.
The Dow Jones industrial average dropped 13.36 to close at 2,509.41, extending the loss since the start of the year to nearly 125 points. The five-session losing streak is the longest since the Dow dropped five straight days April 18-24 of last year.
In the broader market, decliners led gainers by 922 to 558. Volume on the New York Stock Exchange was 143.4 million shares, up from 130.6 million Monday.
“As long as there’s no news out on the Mideast and anything but a military solution (in the offing), the market will follow the path of least resistance, which is down,” said Robert Kahan, manager of Montgomery Securities’ equity trading.
The market got a brief lift near midday after the Fed apparently acted to lower the federal funds rate--what banks charge each other for overnight loans--to 6.75% from 7%.
Nevertheless, the sheer uncertainty about the Mideast crisis kept buyers passive. “It was a paralysis day,” said Alan Newman, a technical analyst at H D Brous & Co.
Many analysts see little chance of the market moving higher before the Jan. 15 deadline by which Iraq must leave Kuwait or face war. And at that point, the market also will have to contend with what could be disappointing fourth-quarter earnings reports.
Among the market highlights:
* The Dow average was weighed down by 3M Co., off 2 1/8 to 80 1/8; IBM, down 1 1/4 to 109, and Alcoa, off 7/8 to 55 1/8. The losses showed increasing investor nervousness about industrial companies’ prospects, even though the stocks are thought to be so low that they already discount sharply lower earnings in the recession.
* Food and drug stocks stabilized after a four-day slide, but there was little aggressive buying. General Mills added 1 1/8 to 45 and Warner Lambert rose 1/4 to 62 1/4, but Pfizer lost 1 1/4 to 75 and Ralston Purina fell 3/4 to 92 7/8.
* Big bank stocks continued to slide. Wells Fargo dropped 2 5/8 to 51 3/8 after Montgomery Securities cut its 1991 estimate on the company, although Montgomery still insisted the stock was a “buy.” Security Pacific lost 1/2 to 18 7/8, and First Interstate gave up 7/8 to 21 3/4.
New England banks continued to be pummeled in the wake of the failure of Bank of New England. Bank of Boston dropped 3/4 to 5 1/8, and Shawmut slumped 1/2 to 4 1/4.
* McDonnell Douglas plunged 7 1/2 to 31 1/4, and General Dynamics tumbled 2 1/2 to 22 1/2. The Pentagon canceled a $4.78-billion jet development contract with the firms.
* Pan Am fell 3/8 to 3/4 after filing for bankruptcy protection, but competitors gained on the news. AMR rose 1 1/8 to 45 1/2, Delta jumped 2 to 59 and UAL rose 1 1/4 to 111.
* Millipore plummeted 3 5/8 to 31 1/8. Cowen & Co. issued a sell on the company after it released a revenue forecast Monday that fell short of Cowen’s expectations.
*Many smaller Southland high-tech stocks were dumped in what appeared to be a rash of selling by individual investors. Filenet dropped 3/4 to 6 3/4, Bell Industries lost 3/4 to 12 1/2, IDB Communications fell 1/2 to 5 1/2 and Advanced Logic lost 1/2 to 8 3/4.
In London, shares ended down but above the day’s lows in subdued trading ahead of today’s U.S.-Iraqi meeting in Geneva. The Financial Times-Stock Exchange index of 100 stocks fell 13.4 to 2,099.9, the first finish below 2,100 since Nov. 19.
In Frankfurt, German shares recovered most of their early losses to end little changed. The 30-share DAX index ended 4.21 points lower at 1,353.95.
In Tokyo, stocks finished sharply lower on fears of war in the Mideast, with the Nikkei average closing below 23,000 for the first time since Dec. 6, but trading was thin. The Nikkei ended down 838.73, or 3.5%, to 22,897.84. At midday today, the Nikkei was up 41.49 points.
CREDIT Key Bond Price Dips; Fed Cut a Surprise Bond prices were mixed Tuesday as Persian Gulf war fears continued to haunt the market. And in a surprise move, economists said the Federal Reserve appeared to ease interest rates again to stimulate economic activity.
The Treasury’s bellwether 30-year bond was down 27/32 point, or $8.44 per $1,000 in face amount, at closing Tuesday. Its yield jumped to 8.38% from 8.30% late Monday.
But yields eased on bonds of shorter maturities, as the Fed appeared to reduce the federal funds rate, the interest on overnight loans between banks. If the Fed action is sustained, it would drop the target for the rate to 6.75% from 7%.
CURRENCY Dollar Rises as Traders Stock Up The dollar rose broadly as traders stocked up in advance of diplomatic talks that many viewed as offering a slim chance for peace in the Persian Gulf.
The dominant focus on the dollar as a safe-harbor investment overrided several compelling economic signs, including an apparent move by the Federal Reserve to ease interest rates and a reiteration by Germany’s central bank that it would continue to keep credit tight.
The dollar advanced to 136.50 Japanese yen in New York, up from Monday’s 136.10. Against the German mark, the dollar rose to 1.542 from 1.535.
COMMODITIES Supply Report Still Boosting Pork Prices Hog and pork belly futures surged Tuesday on the Chicago Mercantile Exchange as the market continued to react to last week’s U.S. Agriculture Department hogs and pigs report.
Live hogs settled 0.65 cent to 1.50 cent higher, with the contract for delivery in February at 51.22 cents a pound; frozen pork bellies were 2 cents higher, with February at 68.72 cents a pound.
Gold was $3.90 to $4.20 lower, with February at $392.30 an ounce; silver was 16.1 to 17.5 cents lower, with March at $4.177 an ounce.
Oil prices slipped, after Monday’s surge, as traders waited for today’s talks between Secretary of State James A. Baker III and Iraqi Foreign Minister Tarik Aziz.
Crude oil for February delivery on the New York Mercantile Exchange fell 48 cents to $27.17 a barrel, after soaring $2.75 Monday.
Market Roundup, D6
