STOCKS : Dow Falls 6.94 as Late Selling Sinks Market
Stock prices edged lower Thursday in a market that can’t seem to make up its mind which way to go.
The Dow Jones industrial average slid 6.94 points to 2,998.43, dipping below the key 3,000 level in a late wave of selling.
In the broader market, 792 stocks rose, 782 fell and 541 were unchanged on active New York Stock Exchange volume of 174.69 million shares, off from 196.13 million Wednesday.
“The market is really looking for something to lead it out of the desert,” said Gene Seagle, analyst at Gruntal & Co.
Alfred Goldman, market analyst at A. G. Edwards & Sons, said: “This trendless market points out that investors have a high level of confusion.”
Profit-taking hit smaller stocks, which had hit record closing highs for two sessions running. The NASDAQ over-the-counter index pulled back 2.03 points to 515.65 after setting records Tuesday and Wednesday.
In addition, the bond market fell after a recent rally, putting added pressure on stocks.
But some analysts took heart from the market’s resilience despite mixed signals on the economy and a Wall Street scandal involving Salomon Inc.
The prominent investment firm is the subject of a government inquiry into violations of trading rules in the Treasury market.
Salomon slid 4 3/4 to 26 7/8, a one-day fall of 15%. After the market closed Wednesday, Salomon provided the first details of the ongoing government probe and said it could be banned from the government securities market.
Among the market highlights:
* The Dow was weighed down by weakness in Disney, off 2 1/2 to 119 3/4; Sears, down 1 1/4 to 40 7/8, and Chevron, off 1 to 68 1/2.
* Bank stocks continued to churn. Merger partners BankAmerica and Security Pacific both fell, down 3/4 to 42 1/4 and 1/2 to 35 1/8, respectively. But Wells Fargo gained 2 3/8 to 80 after Donaldson Lufkin & Jenrette Securities recommended it.
* Tech stocks ran into profit-taking. Apple lost 1 5/8 to 53 1/4, AST Research dropped 1 1/4 to 28 1/2 and Southland-based software firm MacNeal-Schwendler fell 2 1/2 to 13 1/2. MacNeal reported a sharp drop in quarterly earnings.
* Southland home builder J. M. Peters gained 1/2 to 2 5/8. The government approved plans for insolvent San Jacinto Savings to find a buyer for its 86% stake in Peters.
* Brinker International jumped 2 1/8 to 46. The restaurant chain has been climbing since it reported higher fourth-quarter earnings this week. Also, Santa Ana-based GB Foods jumped 1/2 to 7 1/2 after proposing a 5-for-4 stock split.
Overseas, Tokyo stocks declined because of futures and options-related selling. The Nikkei average lost 374.62 points to 23,018.68.
German share traders waited anxiously for the Bundesbank to announce its interest rate rises, but the Frankfurt bourse closed before it did so. The DAX average ended 4.1 points up at 1,654.29.
Britain’s Financial Times 100-share average reached a new closing high of 2,617.2, up 8.4 points.
Credit
Yields fell on short-term government bonds but rose on longer-term ones. There was disappointment about an economic report that was stronger than expected and concern that the Federal Reserve may not ease interest rates further soon.
The price of the Treasury’s 30-year bond fell 9/32 point, or about $2.81 per $1,000. Its yield rose to 8.08% from 8.06% Wednesday.
The government reported that builders boosted construction of houses and apartments by 3.7% in July. In another economic report, the Labor Department said the number of Americans filing new claims for unemployment benefits edged up 8,000, to 408,000, during the week ended Aug. 3.
The housing report “was a little stronger than people were looking for,” said Mike Casey, economist with Maria Ramirez Capital.
Indications of economic strength often depress bond prices because they make it less likely that the Federal Reserve will lower interest rates to stimulate the economy.
The federal funds rate, the interest on overnight loans among banks, was quoted at 5.75%, up from 5.50% late Wednesday.
Currency
The dollar finished higher against most major currencies as the strong report on U.S. housing starts outweighed the effects of a long-awaited hike in German interest rates.
The rate hike would tend to weaken the dollar against the German mark as investors seek more marks to buy higher-yielding German securities.
But traders said that while the dollar stalled somewhat in the morning, it improved later.
“All this rate hike business has been built into the price the past week or so,” said Kevin Lawrie, director of foreign exchange at Bank of Boston.
On the other hand, the Labor Department’s housing starts report was “remarkably better than expected, so the dollar started to stabilize a bit,” Lawrie said.
The dollar finished in New York at 1.749 German marks, up from 1.737 Wednesday. It closed at 137.05 Japanese yen, compared to 136.50 Wednesday. The British pound finished at $1.672, down from $1.686 Wednesday.
Commodities
Grain and soybean futures prices closed higher in active trading on the Chicago Board of Trade as speculators took advantage of the previous day’s selloff in soybeans to buy into the market.
The rally in soybeans was due to heavy buying by professional funds, said William Biedermann, an analyst with Allendale Inc. in Chicago.
Wheat prices were higher because of the low level of world stocks, he said. Corn prices rose along with soybeans.
Wheat for September delivery settled 3.50 cents higher at $2.995 a bushel; September corn was 3 cents higher at $2.465 a bushel; September oats were 2.75 cents higher with September at $1.25 a bushel, and August soybeans were 10.50 cents higher at $5.49 a bushel.
Meanwhile, light, sweet crude oil for September delivery settled at $21.44 per barrel, up 17 cents, on the New York Mercantile Exchange. The contract had fallen 31 cents Tuesday.
Precious-metals futures drifted lower in quiet trading on New York’s Commodity Exchange.
Gold was 80 cents to $1 lower, with August at $357 an ounce; silver was 3.4 to 3.7 cents lower, with September at $3.930 an ounce.
