STOCKS : Dow Up 13.86, but Fall in IBM Cuts Rally Short
Stocks rose moderately in a volatile session Tuesday led by health-care stocks. A big drop in IBM stopped a broader rally.
The Dow Jones industrial average rose 13.86 points to 2,906.08, the first close above 2,900 since May 13. Most other indexes posted better gains.
In nationwide trading of New York Stock Exchange-listed stocks, 984 issues advanced, 578 declined and 513 were flat.
Big Board volume jumped to 186.86 million shares from Monday’s sleepy 109.51 million.
At one point, the Dow was up nearly 30 points, as investors went bargain-hunting for drug, retail and food stocks. Then the rally nearly evaporated when a Shearson Lehman analyst cut his 1991 earnings estimates for IBM.
The move “took the steam out of the market,” said Peter Davies, analyst at Nomura Securities.
But when IBM quickly said it had offered no new information to analysts regarding its outlook, the market recovered much of its losses. IBM ended down 1 3/4 at 101 1/2.
“This has been a very fragile market anyway, and it doesn’t take much to shake it,” said trader Jeffrey Kaminsky at Mabon Securities Corp.
Robert Walberg, analyst at MMS International, noted that the stocks in demand Tuesday were those in “defensive” businesses that should weather a continuing recession reasonably well. “The assumption is the recession will be longer than expected,” he said.
Among the market highlights:
* Bristol-Myers Squibb added 1 7/8 to 83. A Sanford C. Bernstein analyst reaffirmed a “buy” rating on the drug company. Elsewhere in the group, Merck jumped 2 1/4 to 121 7/8, Johnson & Johnson added 2 3/8 to 93 5/8, Lilly gained 1 7/8 to 78 5/8 and Pfizer rose 2 to 58 1/4.
* Among other health-care stocks, Community Psychiatric rose 2 to 33 1/2, National Medical Enterprises advanced 1 to 46 7/8, Mentor Corp. gained 3/4 to 19 1/4 and Salick Health Care jumped 1 1/2 to 12 3/4.
* In the food and tobacco group, Philip Morris was up 1 1/4 to 65 7/8, Seagram gained 1 1/8 to 101 1/4 and Chiquita rose 1 to 43.
* IBM’s fall hurt other tech stocks, but most still finished up. Computer Sciences rose 1 7/8 to 65, Apple advanced 1 to 45 1/4 and Sun Microsystems added 1 to 35 5/8.
* West Coast bank stocks were sharply higher. Wells Fargo jumped 4 1/8 to 93 7/8, an all-time high. The company said it knew of no reason for the rise. Last week, investor Warren Buffett indicated he wished to raise his 9.7% stake in the bank. Other gainers included Security Pacific, up 7/8 to 25 7/8, and First Interstate, up 1 3/8 to 39 5/8.
* Retailer Dayton Hudson jumped 2 to 74 1/8 after reporting a first-quarter profit at the high end of analysts’ estimates. Other retail winners: Kmart, up 2 1/8 to 43 3/8, Home Depot, up 1 7/8 to 60 3/4, and Price Co., up 1 1/2 to 52.
Also, Sherman Oaks-based House of Fabrics rocketed 2 3/8 to 26 3/4 after reporting sharply higher first-quarter earnings and projecting improved growth this quarter.
* Among other Southland stocks benefiting from good earnings reports, Caesars World rose 7/8 to 21 7/8 and Neutrogena gained 1 to 17.
* Many industrial stocks either dropped or rose only slightly, showing investors’ increasing fear of this group, as the recession wears on. Caterpillar slumped 1 3/8 to 48 1/8 after giving a dismal projection of second-quarter results. Other industrial stocks falling included Cummins, which slashed its dividend 91%. It fell 1 5/8 to 36.
* Orion Pictures plummeted 1 5/8 to 7, or 20%, making it the biggest percentage loser on the NYSE. The company late Monday announced a recapitalization that could sharply dilute shareholders’ stake. Also, Orion’s junk bonds--which would be tendered for new debt and stock in the recap--plunged $60 to $70 per $1,000 face value Tuesday, leaving most trading around 50 cents on the dollar.
* The India Growth Fund tumbled 1 5/8 to 11 on news of the assassination of Rajiv Gandhi.
* Telefonos de Mexico, the Mexican phone shares traded over-the-counter, closed at 1 11/32. The stock was effectively split on Tuesday: OTC shareowners will receive a prorated number of shares in the new NYSE-traded Telefonos issue. The total dollar value of the OTC shareowners’ investment in Telefonos will remain the same.
Overseas, Germany’s 30-share DAX average jumped 18.53 points to close at 1,617.40. In London, the Financial Times 100-share average rose 16.1 points to close at 2,482.7.
In Japan, the Nikkei average lost 41.82 points to end at 25,481.21.
Credit
Government bond prices rose, boosted by a successful Treasury auction of 335-day cash management bills, a favorable economic report and a short-covering rally.
The Treasury’s bellwether 30-year bond rose 5/16 point, or $3.12 per $1,000 in face amount. Its yield fell to 8.25% from 8.27% Monday.
Mike Casey, economist with Maria Ramirez Capital, said the market viewed the auction as a success, helping to boost bond prices.
A further boost came when the Treasury released its federal budget report for April, which showed continued economic weakness.
Signs of economic softness are viewed favorably by the bond market since they imply the Federal Reserve may be inclined to lower interest rates.
Toward the end of the afternoon, many traders covered short positions, lifting bond prices further, market-watchers said.
The bond market faces two more government auctions this week. Today, the Treasury will sell $12.25 billion in two-year notes, and on Thursday, $9.25 billion in five-year notes.
The fed funds rate, the rate on overnight loans between banks, remained at 5.688%.
Currency
The dollar fell after a bout of central bank selling, ending a rally that began Friday when Sweden tied its crown to a basket of European Currency Unit.
The dollar closed in New York at 1.712 German marks, down from 1.732 marks Monday. It also fell to 137.30 yen, from 138.50 Monday.
News that former Indian Prime Minister Rajiv Gandhi was assassinated failed to move the market.
Commodities
Soybean futures prices rose sharply on the Chicago Board of Trade amid heightened hopes for new sales to the Soviet Union and a report that soybean planting is running behind the normal pace.
Soybean futures settled 6.25 to 8.50 cents higher, with the July contract at $5.79 a bushel.
Most market analysts agreed the buying was prompted in part by a General Accounting Office opinion that the Soviet Union was qualified to receive additional food export credits under existing laws.
Elsewhere, gold ended 10 to 20 cents lower, with June at $357.90 an ounce; silver was 0.8 to 0.9 cent higher, with May at $4.03 an ounce.
Light, sweet crude oil futures settled up 3 cents at $21.40 a barrel on the New York Merc ahead of a weekly American Petroleum Institute report that showed an unexpectedly large increase in U.S. crude oil stocks during the week ended Friday.
Market Roundup, D6
