STOCKS : Most Issues Advance, but Dow Slips 4.95
Blue chip stock indexes were dragged lower by a few key issues Monday, but most stocks rose, ignoring reports of fresh Iraqi missile attacks in the Middle East.
The Dow Jones industrial average fell 4.95 to 2,654.46, after a 56.19-point rise in three previous sessions.
In the broader market, advancing issues outnumbered declines on the New York Stock Exchange, with 942 up, 607 down and 451 unchanged.
Big Board volume came to 141.27 million shares, down from 194.35 million Friday.
Stocks also continued to advance in the over-the-counter market. The NASD OTC composite index rose 2.52 to 396.80, powered by another strong gain for tech stocks and some medical issues.
“I think the market is very much in gear whether the Dow is down or sideways,” said Alan Newman, a technical analyst at H. D. Brous. “Most stocks are in demand.”
Reports on the Gulf War had a limited impact on stocks, which retreated modestly on reports of more Scud attacks. “You almost expect it to happen,” said Alice Sadlo, a vice president at McDonald & Co. “If it turns out we’ve hit them (the Iraqi missiles), it’s business as usual, so to speak.”
Without significant new developments in the war, many investors have turned their sights to expectations of a recovery for the economy by mid-1991. Also, many companies continue to show impressive earnings growth despite the recession, so the fundamentals are supporting renewed interest in stocks after nearly six months of prewar paralysis.
Among the market highlights:
* The Dow was hurt by sharp declines in two key component stocks, after disappointing earnings reports. Boeing lost 2 1/4 to 46 7/8 after reporting quarterly earnings of 92 cents a share. Analysts had expected $1.02 a share. Also, Procter & Gamble dropped 2 1/2 to 77 1/2 after reporting quarterly earnings of $1.36 a share, versus expectations of $1.39. Both companies’ results were well above year-ago levels, but investors had hoped for better.
Another Dow stock, McDonald’s, fell 5/8 to 27 3/4. The company reported 11% quarterly profit growth, as expected, but also warned that 1991 would be a more difficult year.
* A positive earnings surprise helped send health-maintenance organization firm U.S. Healthcare rocketing 4 to 31 3/4. The company said it expects fourth-quarter earnings of 55 cents a share, versus expectations of 40 cents. Other HMO stocks also jumped, including California operators FHP International, up 1 1/2 to 15, and PacifiCare, up 1 to 17 1/2.
Hospital stocks also were strong after Wertheim Schroder & Co. recommended Humana. It gained 1 5/8 to 40 5/8. Also, National Medical Enterprises jumped 7/8 to 42 5/8, a new 52-week high.
Medical-product stocks, however, stalled after Becton Dickinson plunged 3 5/8 to 68 3/8. The firm said its second-quarter earnings and sales are growing at 8%, compared to Wall Street estimates of 15%.
* Technology stocks were strong again. IBM soared to a new 52-week high of 125 before closing at 124 1/4, up 1 5/8. Digital Equipment gained 2 to 67 1/2, AST Research rose 1 1/4 to 42, Apple added 1 to 54 1/2 and Microsoft jumped 2 3/4 to 92 1/4.
* Autodesk rose 1 1/2 to 41 3/4. Morgan Stanley reiterated a “buy” rating after the software company’s shares fell sharply Friday on a disappointing fourth-quarter profit projection.
* Culver City-based IDB Communications slipped 1/4 to 8 1/4, despite announcing that rising revenue from its satellite communications business could mean record earnings in 1991. The firm expects fourth-quarter earnings of 10 cents a share, compared to 6 cents a year ago.
* Torrance-based International Technology jumped 1 1/4 to 10. Smith Barney repeated a buy rating on the stock, citing potential oil clean-up business for the firm in the Persian Gulf, after the war.
* Tonka fell 3/4 to 4 3/8. The company said it expects to post a substantial loss for 1990 and is engaged in talks about its possible sale. Mattel, a possible buyer of Tonka, inched up 3/8 to 19 3/8.
Credit
Lack of dramatic war developments or startling economic news kept bond trading subdued, with prices strengthening slightly.
The Treasury’s bellwether 30-year bond rose 1/16 point, or 63 cents per $1,000 face amount. Its yield was 8.22%, the same as late Friday.
A Commerce Department report showing that personal income in December had risen 0.7% sent bond prices lower in the morning. It was the largest increase since a similar 0.7% gain last March.
“That came in stronger than expected and it surprised the market,” said Howard Roth, economist for Security Pacific in Los Angeles.
Traders said the report suggested that the recession may have bottomed out in the fourth quarter, thereby lessening the prospects for further interest rate cuts, said Elizabeth G. Reiners, bond analyst for Dean Witter Reynolds.
Traders said the Federal Reserve added reserves to the banking system, but the federal funds rate held at 8%, the same as late Friday. The federal funds rate is the interest on overnight loans between banks and is a closely watched barometer of moves by the central bank.
Currency
The dollar drifted aimlessly lower in thin trading, undermined by the lack of compelling news about the war and continued worries about the recession, analysts said.
The dollar initially edged higher against major currencies after the release of the personal income report, which suggested an improving economy.
But “the market still feels the Fed will ease (interest rates) more before the economy bottoms out,” said Tom Benfer, marketing representative in the currency trading unit of Bank of Montreal.
For right now, however, “There’s just no sense of direction in this market, no willingness to take it higher or lower,” said Earl I. Johnson, a vice president for Harris Bank in Chicago.
In New York, the dollar closed at 1.487 German marks, against Friday’s 1.491. It also closed at 131.60 Japanese yen, compared to Friday’s 132.55 yen. The British pound rose to $1.965 from $1.956 late Friday.
Commodities
Platinum prices approached five-year lows as industrial and investment demand for the metal lagged.
On other markets, gold and silver futures rose slightly; sugar futures sank; energy futures were mostly lower; livestock and meat futures rose, and grains and soybeans were mixed.
Platinum futures settled $8.40 to $9 lower on the New York Mercantile Exchange, with the contract for delivery in January at $379.30 an ounce, the lowest spot platinum price on the exchange since Feb. 14, 1986. The more actively traded April contract finished at $383.50.
Gold futures settled $1 to $1.60 higher on New York’s Commodity Exchange, with February at $377.10 an ounce. Silver was 2.3 to 2.5 cents higher, with March at $3.84 an ounce.
Elsewhere, light sweet crude oil settled 39 cents lower at $20.96 a barrel; heating oil was 0.58 cent to 1.19 cents lower, with February at 68.28 cents a gallon.
Market Roundup, D10
