STOCKS : Dow Remains Same Despite Bad IBM News
The stock market ran out of steam Friday, with blue chips closing unchanged from the previous session despite market leader IBM’s sharp drop in earnings.
The Dow Jones industrial average closed at 3,016.32, the same as Thursday, when blue chips rose 37.55 points to hurtle past the psychologically important 3,000 barrier.
Declining issues slightly outnumbered advances on the New York Stock Exchange.
Big Board volume came to 189.16 million shares at 4 p.m. EDT, against 199.22 million at the same point Thursday.
The key event in Friday’s trading was the release of poor second-quarter earnings by IBM. Although they fell 92% from a year earlier, they were within traders’ expectations, and the stock ended higher.
“There was a sigh of relief,” said Alice Sadlo of McDonald & Co. “After that, it looked like no one seemed to care.”
The expiration of July stock index options and options on individual stocks had little effect on the market.
“This is a little bit discouraging after the advance yesterday,” said Bob Walberg, an analyst with MMS International. “It’s been a quiet, consolidative session. There really didn’t seem to be any defined leadership.”
Philip Roth, chief technical analyst at Dean Witter Reynolds, said investors are starting to look ahead to the third quarter now that many large companies have reported second-quarter earnings.
“Second-quarter earnings are basically no longer relevant,” he said. “The market will quickly go to focusing on third-quarter, money supply and interest rates.”
Traders said IBM offered a preview of the second half of the year, when it said that business should be better.
“That is functionally equivalent to an economic indicator,” said Hugh Johnson, chief investment officer at First Albany Corp.
Among market highlights:
* IBM closed up 2 1/4 at 100 1/2. It posted a profit of 20 cents a share in the second quarter, down from $2.45 a year earlier. It said it has no plans to cut its dividend.
* Boeing dropped 1 1/8 to 43 3/4. Traders said C. J. Lawrence issued negative comments about the company and Merrill Lynch cut its rating and estimates.
* Amgen rose 3 3/4 to 138 1/2 after reporting first-quarter results. Analysts at Smith Barney, Alex. Brown and Prudential raised estimates on the biotechnology concern.
* Telefonos de Mexico gained 1/2 to 31 7/8. Salomon Bros. raised its 1991 and 1992 estimates on it.
* Stratus Computer jumped 4 1/8 to 35 3/8. Several analysts raised estimates after the company reported strong second-quarter results.
* Texas Instruments dropped 3 1/4 to 33 1/2. Analysts cut estimates after it posted a second-quarter loss of $1.99 a share after a cost-reduction charge.
Stocks closed mixed overseas.
Germany’s 30-share DAX average rose 5.66 points to 1,623.99.
In Tokyo, the 225-share Nikkei index slipped 42.35 points to 22,866.36.
In London, the 100-share Financial Times average fell 5.8 to 2,541.5.
Credit
A weak money supply report left bond prices mixed in a quiet session devoid of economic news.
The Treasury’s bellwether 30-year bond lost 1/32 point, or 32 cents per $1,000 in face amount. Its yield, which moves in the opposite direction from price, was 8.47%, the same as Thursday.
Trading was light, with Thursday’s money supply report providing the only lift.
Bond dealers interpreted the report to mean that the recovery will be muted, said Kevin Flanagan, money market economist for Dean Witter Reynolds.
Bond prices tend to rise on weak economic news because the Federal Reserve is more inclined to cut interest rates to stimulate the economy. Interest rate cuts make fixed-income securities more valuable.
The federal funds rate, the interest on overnight loans between banks, was quoted at 5.675%, down from 5.75% Thursday.
Currency
The dollar tumbled against most major currencies in light dealings that traders said were driven mostly by internal influences in the foreign exchange markets.
The dollar was lower for this week in the aftermath of concerted efforts by several central banks to curb its rise.
It ended at 1.748 German marks Friday, down from Thursday’s 1.776. It was at 136.40 Japanese yen, up from 137.65. The British pound rose to $1.69425 from $1.6645.
Commodities
Oil futures prices were at their highest level since the final days of the Persian Gulf War, stoked by a report of fighting in Iraq and rumors--later denied--of an explosion on a North Sea oil platform.
On other markets, corn and soybeans were mixed, and wheat was higher; energy and precious metals were higher, and livestock and meat were lower.
The August contract for light sweet crude rose as high as $22.25 before settling at $22.16 a barrel on the New York Mercantile Exchange, up 22 cents from Thursday.
The close eclipsed Wednesday’s $22.14 to become the highest closing price for a near-term contract since Feb. 14th’s $22.32 per barrel.
Precious metals were higher on the Commodity Exchange in New York. Gold was 20 to 40 cents higher, with August at $370.60 an ounce, and silver was 0.8 of a cent higher, with July at $4.386 an ounce.
