STOCKS : Traders Fear Top Out of Market; Dow Off 23
Stock prices fell sharply Tuesday as investors opted to reap profits, seeing little room for further market gains on news of continued allied successes in the Persian Gulf War.
The Dow Jones industrial average ended down 23.27 points at 2,864.60. In the broader market, declining issues outnumbered advancing ones by about 13 to 5 in nationwide trading of New York Stock Exchange-listed stocks, with 1,154 down, 443 up and 447 unchanged.
Big Board volume came to 164.17 million shares, down from Monday’s 193.82 million.
Stocks fell despite reports that the allied forces were beating Iraqi forces in their advance on Kuwait city. President Bush rejected Iraq’s offer to withdraw from Kuwait and said coalition forces will continue to fight the war.
Prices were already fattened in recent weeks by the prospects of a successful end to the war and had little room for further growth, experts said.
“The market went up on war, and now that we can smell peace, we’ve got the converse,” said Jack Solomon, a technical analyst at Bear Stearns.
The market appeared due for a correction, analysts noted.
“I think it’s a case that people are admitting the market had an overdone run and now we’re giving some of that back,” said Alice Sadlo, a vice president at McDonald & Co. “I think there’s already a focus on what will happen after the war.”
David Chao, head of facilitation trading at County NatWest, concurred, saying, “I guess it’s a case of, ‘We’re in and they’re out (of Kuwait),’ so what’s next?
“Overall, there’s a bit of profit taking.”
Analysts said some investors were turning their attention to domestic fundamentals and wondering whether the Federal Reserve would continue to ease credit.
“It’s a pause to reconsider the immediate outlook now that the end of the war is in sight,” said Solomon. “People are asking whether there’s any impetus for the Fed to lower rates further and whether there’s any concern about inflation.”
Among market highlights:
* Oil companies returned to favor, with Atlantic Richfield up 1 1/4 to 127 1/2, Pennzoil Co. ahead 1 5/8 to 67 7/8, Texaco Inc. adding 1 3/8 to 61 1/4, Chevron Corp. up 1 to 72 1/4 and Mobil Corp. up 1/2 to 59 3/8.
* International Business Machines fell 3 3/4 to 129 7/8. Paine Webber lowered its rating and 1991 estimate, citing concerns about slowing overseas demand for computers.
* Hope that Oceaneering International and Cooper Industries will receive contracts for the rebuilding of Kuwait boosted shares of the companies. Oceaneering gained 1 5/8 to 12; Cooper added 1 3/8 to 49 1/4.
* Avondale Industries dropped 2 1/8 to 4 3/4. Tucker Anthony lowered its rating to sell from hold after the shipbuilder surprised Wall Street by suspending its 23-cent dividend.
* Smith Barney lowered 1991 earnings estimates on several major airlines. UAL Corp. lost 4 1/8 to 140 7/8, AMR Corp. fell 2 3/8 to 57 5/8, Southwest Airlines fell 3/8 to 26 1/8 and USAir was unchanged at 20 5/8.
In German trading, uncertainty about exactly what was happening in the Gulf War and a sizable package of tax rises to help fund the offensive and German unity pressured shares. The 30-share DAX index closed 42.91 points, or 2.7%, lower at 1,558.24.
Stocks closed lower on the Tokyo Stock Exchange after heavy profit taking emerged when the market failed to rally decisively on reports that Iraq had offered to withdraw from Kuwait. The Nikkei 225-share average was down 179.80 at 26,282.96.
Share prices also fell on London’s Stock Exchange in what dealers said was merely a retrenchment in a bullish market. The Financial Times 100-share average fell 13.3 to 2,322.2.
Credit
Government bond prices were pushed sharply lower by oversupply concerns and signs that the economy has bottomed out. Optimism over a possible end to the Gulf War reinforced a belief that the recession could end soon.
The Treasury’s bellwether 30-year bond dropped 29/32 point, or $9.06 per $1,000 in face amount. Its yield rose to 8.13% from 8.05% late Monday.
Two pieces of positive economic news reinforced the perception that the worst of the economy’s problems may be near an end. An improved economy would tend to reduce the chances that the Fed would lower interest rates to stimulate activity. Lower rates tend to support bond prices.
The Commerce Department reported that January factory orders for durable goods fell 0.7% to a seasonally adjusted $118.5 billion. Economists had expected a drop of around 2%, said Steven A. Wood, money market economist at BankAmerica Capital Markets Inc. in San Francisco.
Meanwhile, the Conference Board said its widely watched consumer confidence index reversed course this month to post a moderate improvement. The index had plunged since the beginning of the Persian Gulf crisis.
Wall Street also faces a heavy supply of Treasury securities after the government’s quarterly refunding auction last month and sale of two- and five-year notes last week. That prodded traders to lower the bond prices to attract investors, Wood said.
The federal funds rate, the interest on overnight loans between banks, was quoted at 4.50%, down from 6.375% late Monday. Traders said the decline appeared to be a technical correction and did not signify a change in Federal Reserve policy.
Currency
The dollar ended higher against most leading currencies, boosted by hopes that the Gulf War soon will be over and that the U.S. economy will get a boost as a result. The U.S. currency closed at 1.5234 German marks, up from 1.5200 marks at Monday’s close. It closed lower against the Japanese yen at 132.94 yen, down from 133.55 yen.
Athough the dollar finished below the day’s best levels, traders said that the mood remains bullish and that the currency is poised for more gains as news comes in of the Iraqi army’s retreat from Kuwait.
The buying interest stems from market optimism that a quick end to the war will rekindle consumer confidence and ignite an economic rebound.
Allied forces’ success in the ground war inspired dollar buying in morning trading, pushing the currency to its daily highs of 1.5295 marks and 133.65 yen.
In London, the British pound fell to $1.9215 from $1.9235 late Monday. The dollar also rose against the pound in New York, where sterling settled at $1.9194, less expensive than late Monday’s $1.9265.
Commodities
Platinum prices leaped to erase a week’s worth of losses on a hunch in the trading pits that an end to the Gulf War would hasten a U.S. economic recovery and spur an increase in industrial demand for the metal.
On other commodity markets, gold and silver fell; oil prices rallied; hogs and pork bellies surged; cattle futures rose, and grains and soybeans advanced.
Platinum futures settled $8.10 to $8.30 higher on the New York Mercantile Exchange, with the contract for delivery in April at $385 an ounce.
The move represented the market’s strongest rally since Nov. 23 and was a significant rebound from the five-year lows at which platinum has traded since late January.
Gold futures finished 30 to 50 cents lower on New York’s Commodity Exchange, with February at $359 an ounce; silver was 1.3 to 1.7 cents lower, with March at $3.563 an ounce.
Energy futures rallied on the New York Merc, paced by strong gains in gasoline and heating oil.
Light sweet crude oil futures settled 11 to 46 cents higher, with April at $18.37 a barrel; heating oil was 0.45 cent to 1.78 cents higher, with March at 63.73 cents a gallon; unleaded gasoline was 0.70 cent to 3.3 cents higher, with March at 63.95 cents a gallon; natural gas was 0.2 cent to 1.1 cents higher, with April at $1.355 per 1,000 cubic feet.
Market Roundup, D6
