Flirting With 3,000 : Dow Tips Mark but Slides Back

Electrified investors twice heaved the Dow Jones industrial average past the 3,000 mark Wednesday, but the number retained its potency as a psychological barrier and the average fell back to close at 2,973.27, up just 0.75 from Tuesday.

Nevertheless, senior traders surveyed after the close predicted that the rally that began with the start of the Gulf War and lofted the Dow index by 58.41 on Tuesday isn’t over. Most predicted a record high within the next few days.

“In a day after a huge gain, being up 75 cents is a hell of a performance,” said Brad Weekes, senior vice president for equity trading at Donaldson, Lufkin & Jenrette Securities. Weekes and others said the outbreak of optimism fueled by the swift, successful end to the Gulf War shows no signs of abating.

Wednesday was the first time since mid-July that the Dow average of 30 industrial stocks moved above 3,000 during intra-day trading. But the average has yet to close above that number. The record high remains 2,999.75, reached twice, on July 16 and 17.

Analysts said heavy profit taking at the end of Wednesday’s session caused the average to settle back. New York Stock Exchange volume was 262.29 million shares, compared to 253.70 million on Tuesday. Advances led declines by 890 to 770 on the Big Board. Nevertheless, the average price per share fell by 4 cents.

Standard & Poor’s 500-stock composite index dropped 0.55 points to 376.17. But the NASDAQ composite index of mostly smaller stocks advanced once again, rising 0.75 to 473.80.

The rally has been fueled mainly by optimism rather than solidly favorable economic news. In testimony before the House Ways and Means Committee, Federal Reserve Chairman Alan Greenspan said Wednesday that the economy continued to edge down through late February. But he said “the incoming information, on balance, does not suggest that the recession is becoming more serious than we thought a month ago when we formulated our economic projections for 1991.”

Michael Sherman, chief investment strategist for Lehman Bros., said many institutional investors still have large amounts of cash on hand. Now that they have become heavy buyers, they aren’t likely to reverse course abruptly, he said.

Individual investors also are returning to the stock market. Mutual funds have reported a tide of money pouring into stock funds, especially well-known blue chip funds such as Fidelity’s Magellan Fund and growth stock funds.

Among Wednesday’s highlights:

* The market’s continual churning was apparent within the Dow. Investors snapped up Alcoa shares, sending the stock up 1 1/8 to 68 7/8. Other Dow gainers included Sears, up 1/2 to 32 1/8, and Westinghouse, up 1/2 to 30 1/8. Losing issues in the Dow were led by International Paper, down 1 1/2 to 62 3/8, and Primerica, off 7/8 to 32 1/2.

* Many technology stocks, which led Tuesday’s rise, continued to inch higher. Compaq gained 1/2 to 72, Sun Microsystems rose 5/8 to 33 3/4, Teradata climbed 3/4 to 17 3/4, Computer Sciences added 3/4 to 62 5/8 and Western Digital rose 3/4 to 5 1/8.

* Airline stocks were broadly lower, pulling the Dow transportation average down 14.64 to 1,151.62. UAL, parent of United Airlines, fell 3 to 148 1/4; AMR, parent of American, dropped 1 3/8 to 60 7/8, and USAir lost 7/8 to 23.

* Maxxam plunged 6 3/8 to 45. Its Kaiser Aluminum unit indefinitely postponed an initial public stock offering.

* Thousand Oaks-based Amgen soared 12 to 113 after winning a major court patent victory over Genetics Institute, which collapsed 21 3/4 to 40 1/4. Johnson & Johnson, which has certain marketing rights for the Amgen drug in question, rose 4 1/4 to 87 5/8. Upjohn, which had planned to market the Genetics Institute version of the drug in the U.S., slumped 3 1/8 to 41 7/8.

* Among smaller Southland issues, New Image Industries jumped 9/16 to 2 3/4, Datron Systems rose 1/2 to 9 1/2, plastics firm Furon gained 1/2 to 15 1/4 and filter-maker Farr Co. was up 1/2 to 11 1/4. House of Fabrics leaped 1 5/8 to 37 1/8 after reporting fourth-quarter earnings up 42%.

Overseas, a flood of foreign orders swept German share prices higher as market euphoria in New York passed along to Europe. Frankfurt’s 30-share DAX index rocketed 54.06 points, or 3.5%, to 1,594.32.

Shares gained strongly in exceptionally heavy trading in London. The Financial Times 100-share average jumped 39.8 points, or 1.6%, to close at 2,459.9.

Japanese stocks also rose smartly with the Nikkei 225-share average shooting up 469.51 to end at 26,382.99.

Credit

Bond prices resumed their slide after Fed Chairman Greenspan’s congressional testimony that the end of the Persian Gulf War could hasten the economy’s recovery.

The Treasury’s key 30-year bond, which had risen Tuesday for the first time in a week, fell 9/32 point, or $2.81 per $1,000 in face value. Its yield rose to 8.27% from Tuesday’s 8.24%.

As recently as Feb. 19, the 30-year bond yield was below 8%.

Traders sold bonds Wednesday on what they said was a signal of the Fed’s hesitation to further lower interest rates to jump-start the economy.

“Chances are the Fed won’t be in a hurry to ease interest rates any further until it becomes clearer whether or not the war is really having an economic impact,” said Douglas Schindewolf, money market economist for Smith Barney, Harris Upham & Co.

Yields on shorter-term Treasury securities also rose. The three-month T-bill yield rose to 6.27% from 6.23% Tuesday.

The federal funds rate, the interest on overnight loans between banks, was unchanged from late Tuesday’s 6%.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 3/32 point to 91 21/32. The average yield to maturity was 7.32%, down from 7.33% late Tuesday.

Currency

The dollar closed lower on profit taking after rallying on Fed Chairman Greenspan’s remarks that the end of the Gulf War would help the U.S. economy.

“There was good demand this morning for the dollar, which broke the 1.55 German mark psychological line. But the rally then just became an excuse to sell the dollar more aggressively,” said Pierre Yves Boulet, dealer at Banque Indosuez.

The U.S. currency ended at 1.538 marks in New York, down from Tuesday’s finish of 1.544, which was the highest close in U.S. trading since Jan. 16, the day before the Gulf War began.

The British pound gained against the dollar in New York, rising to $1.895 from $1.891 Tuesday.

Against the Japanese yen, the dollar closed at 135.70, down from 136.30 Tuesday. It had reached almost 137 yen before the allied offensive to oust Iraq from Kuwait.

Commodities

Profit taking hit the oil market, pushing down the price of light sweet crude for April delivery by 70 cents to $19.73 a barrel on the New York Mercantile Exchange. The fall ended a seven-day rally.

But near-term gasoline futures posted their eighth consecutive move higher, reflecting concern over shrinking domestic supplies and refinery capacity as the summer driving season approaches.

Wheat prices fell slightly on the Chicago Board of Trade as profit taking ended a four-day advance that had lifted the value of a bushel of wheat by as much as 10%. Other grain and soybean futures also finished mostly lower.

Elsewhere, on New York’s Commodity Exchange, gold futures finished $1.10 to $1.20 higher, with April at $366.30 a troy ounce; silver was 2.5 to 3.4 cents higher, with March at $3.87 a troy ounce after rising as high as $3.95.

Platinum finished $3.10 to $3.40 higher on the New York Merc, with April at $401.10 a troy ounce.

Market roundup, D8