FINANCIAL MARKETS : STOCKS : Early Market Rally Fizzles; Dow Slips 2.97
An impending “witching hour” spooked the stock market Thursday, leaving prices with little to show after a broad early advance.
The Dow Jones industrial average slipped 2.97 to 2,952.23. Earlier, the Dow had been up more than 30 points in a continuation of Wednesday’s sharp rise of 32 points, which broke a four-session losing streak.
Big Board volume surged to 231 million shares, against Wednesday’s 176 million. In the broader market, advancing issues and declines ran almost even in nationwide trading of New York Stock Exchange-listed stocks, with 787 up, 785 down and 490 unchanged.
Rumors of an imminent cut in the Federal Reserve’s 6% discount rate on loans to banks had propelled the market’s advance early in the day. But no rate cut was announced by the central bank.
Late Thursday, analysts said a wave of selling emerged, timed to coincide with the expiration today of March stock futures and options.
Also, “technology stocks on the over-the-counter market got very weak, and some of the techs on the Big Board also started acting poorly,” said Tom Gallagher, trader at Oppenheimer & Co.
Rao Chalasani, a Prescott Ball & Turben market strategist, believes that the market will need another cut in interest rates to push it to new highs. “The possibility of the market going above 3,000 is real. But I think it’s more based on interest rates coming down,” Chalasani said.
Among the market highlights:
* Medical stocks shone once again, helped by analysts’ recommendations. Pfizer rose 1 5/8 to 104 3/8, Syntex added 1 3/4 to 76 3/4, Forest Labs advanced 1 3/8 to 35 and Johnson & Johnson rose 2 3/4 to 91 3/4.
Also gaining were health-services companies such as PacifiCare, up 1 3/4 to 23 3/4, and Manor Care, up 1 1/4 to 19 3/8.
* In the tech group, the stocks rode a roller coaster, ending mostly lower. IBM fell 1 to 128 1/8, Apple lost 1 to 65 1/4, AST Research dropped 2 1/4 to 23 and Autodesk slumped 3 3/4 to 47 1/4. But Sun Microsystems gained 1 1/8 to 33 3/8.
* Biotech stocks were strong as Centocor rose 1 3/4 to 66 1/2 after its first major product, Centoxin, was approved for marketing in Europe.
* Among major losers, PPG Industries dropped 3 3/8 to 49 1/4 after it forecast weak earnings. Xerox lost 2 3/4 to 56 1/8. Dean Witter lowered its earnings estimates. Pacific Enterprises slumped 3 5/8 to 34 7/8 on fears of a dividend cut. (Market Beat, D3.)
* There was an earnings bomb in the waste-management business after Laidlaw said its second-quarter profit could fall more than 50% below year-ago levels. The stock plunged 3 to 12 3/4. Other losers in the group included Browning Ferris, off 3/4 to 26 3/8; Chemical Waste Management, down 7/8 to 22 3/4; Western Waste, off 1 3/8 to 17 1/2, and Waste Management, off 1 to 41 3/4.
* Among smaller Southland stocks, retailer Wet Seal added 1/4 to 15 1/4 after trading lower early in the day on its fourth-quarter earnings report. Home builder J. M. Peters gained 1 to 4. There was no news. Trimedyne lost 7/8 to 4 5/8 after the medical instrument maker said its chief executive is resigning to pursue other interests.
Overseas, British stocks jumped 2% to a record close as a wave of panic buying swept the market in the final hour of trading. The Financial Times average of 100 stocks broke the psychological 2,500 barrier to close up 52.4 points at 2,500.6.
German shares jumped 2.2%, boosted by strong foreign demand and futures-related buying. The 30-share DAX average ended 34.36 points higher at 1,576.55.
Stocks closed firmer in Tokyo. The 225-share Nikkei average was up 124.01 at 26,542.33. At midday today, the Nikkei was up another 304.20 points.
Bond prices were mixed as traders sorted through conflicting economic reports and prepared for today’s producer prices report for February, a key inflation gauge.
The Treasury’s bellwether 30-year bond slid 3/16 point, or $1.88 per $1,000 in face amount, in moderate volume. Its yield rose to 8.20% from 8.18% late Wednesday.
Bonds fell slightly after the government reported that initial claims for state unemployment insurance totaled 474,000 in the week ended March 2, down 34,000 from the week before.
Such good economic news is generally bearish for bonds because it makes the Federal Reserve less likely to lower interest rates to spur the economy.
But Treasuries strengthened after the Fed issued its report on the nation’s money supply for the week ending March 4. Analyst William Gross said bonds rose after traders saw that bank loans were flat for the week. That indicated that the Fed’s efforts to loosen credit were still not prompting banks to increase lending.
The federal funds rate, the interest on overnight loans between banks, was quoted at 5.875%, down from 5.938% late Wednesday.
Gross and other analysts still expect the central bank to cut the discount rate, currently at 6%. That rate is the interest the Fed changes member banks for loans at the discount window, where banks seek loans to make up shortfalls in their reserve accounts.
Hopes that the economy will soon rebound boosted the dollar, while the German mark was weighed down by political tensions in the Soviet Union.
The dollar closed at 1.582 marks, up from 1.573 on Wednesday, and at 135.87 Japanese yen, up from Wednesday’s 135.66.
Traders said the mark was pressured by political tensions in the Soviet Union and Eastern Europe, including Albania and Yugoslavia. The mark gave ground not only against the dollar but also against the yen, as some traders saw Japan as more insulated from developments in Eastern Europe.
For the dollar, meanwhile, “it’s real bullish sentiment,” said analyst Bill Bertha of Mellon Bank. Traders said a further lowering of U.S. interest rates has already been priced into exchange rates.
In New York, the British pound cost $1.852, less expensive than Wednesday’s $1.861.
Other late dollar rates in New York, compared to late Wednesday’s rates, included: 1.3715 Swiss francs, up from 1.3645; 5.3910 French francs, up from 5.3605; 1,181.00 Italian lire, up from 1,173.75, and 1.1538 Canadian dollars, unchanged.
Grain and soybean futures prices declined on the Chicago Board of Trade, as the market reacted to forecasts for wet weather in the Central Plains.
The retreat of wheat futures led the overall grain market downward. Wednesday’s National Weather Service six- to 10-day outlook called for wet conditions in the hard red winter wheat crop area during the weekend.
Wheat prices were also driven lower by news that India will harvest a record wheat crop of 55 million metric tons, up from 53.5 million last year.
Wheat settled 3 to 4.75 cents lower, with the contract for delivery in March at $2.755 a bushel; corn was 0.75 cent to 2 cents lower, with March at $2.4925 a bushel.
Elsewhere, oil traders at the New York Mercantile Exchange took profits after this week’s price rally tied to an OPEC agreement to cut output 5% in the second quarter. In a quiet session, April crude fell 18 cents to $20.27 a barrel.
Gold for April delivery on the Commodity Exchange closed $1.80 lower at $366.30 an ounce; silver for May retraced most of Wednesday’s 10-cent gain by losing 8.0 cents to close at $4.07.
Market Roundup, D6