STOCKS : Dow Ignores Good News, Slumps 25.93
Stock prices fell Tuesday in lackluster, post-holiday trading despite good news on the economy. Computer-driven selling in the last hour of trading accounted for most of the decline.
The Dow Jones average of 30 industrial stocks fell 25.93 to 3,017.67.
In the broader market, declines outnumbered advancing issues 955 to 613 with 520 issues unchanged on the New York Stock Exchange.
Big Board volume totaled 153.71 million shares, up from 143.44 million in Friday’s session.
Two economic reports released in the morning appeared to indicate that the economy was recovering. In one, the National Assn. of Purchasing Management, a group of corporate purchasing executives, said its index of business activity rose last month by a greater amount than many expected.
The closely watched index climbed to 54.8% in August from 51.8% in July, the group said. A reading above 50% means the manufacturing economy generally is growing.
In the other report, the government said U.S. construction spending rose 1.6% in July.
Stock prices opened higher on computer-driven buying but then slipped as investors apparently gave little notice to the reports. Prices remained at the marginally lower level from Friday’s close until the last hour, when they were sent downward on computerized sell orders. These orders usually are linked to prices in the stock futures market.
John Burnett, a trader with Donaldson, Lufkin & Jenrette Securities Corp., said the market had little overall direction after the long holiday weekend.
“It’s a continuation of the kind of activity we had Friday,” he said. “There’s still decent buying, but there’s also some profit taking. It’s a market that has no real outstanding feature.”
Among the market highlights:
* Browning Ferris Industries slid 4 to 21 3/4. The waste management services firm said in a government filing that fourth-quarter profits would fall from the third quarter. It was the most active issue on the NYSE. The news hurt another trash hauler, Waste Management, which also was on the most active list as it fell 1 1/2 to 38.
* Among other most active blue chip stocks on the NYSE, American Telephone & Telegraph rose 1/4 to 39 1/4, IBM gained 1 1/8 to 98, Philip Morris fell 5/8 to 73 1/2, Westinghouse Electric dropped 3/4 to 23 1/4, Pepsico fell 7/8 to 31 1/2, Unisys lost 1/2 to 5 1/4, and USX Marathon fell 1 to 31 3/4.
* Compaq Computer rose 7/8 to 36; Kidder Peabody issued a buy rating.
* Panosophic jumped 3 3/4 to 15 1/4 after software maker Computer Associates International announced a preliminary agreement to buy the computer software firm.
* In over-the-counter trading, Compression Labs fell 4 to 18 3/4 after a subsidiary said it let an investment agreement with a potential customer expire.
Stocks fell in London on profit taking after hitting record highs the last two sessions. The Financial Times 100-share average slid 10.6 points to close at 2,669.0.
German shares edged higher in quiet trading, with the 30-share DAX average in Frankfurt rising 5.18 to 1,655.64.
In Tokyo, the 225-share Nikkei rose 0.79 to 22,469.80.
Credit
Bond prices advanced despite the surprising strength in the manufacturing sector that initially sent most Treasuries lower.
The Treasury’s key 30-year issue, which fell 3/32 point in early trading, finished up 3/16 point, or about $1.88 cents per $1,000 in face amount. Its yield settled at 8.04% from late Friday’s 8.06%. U.S. financial markets were closed Monday for Labor Day.
The long bond opened as much as 1/4 point higher, but seesawed lower after the National Assn. of Purchasing Management released its monthly index for August.
Bonds also weakened in reaction to the construction spending report. However, prices inched back up as traders focused on August’s employment report due Friday.
The bond market generally strengthens on signs of economic weakness because they imply that the Fed will consider cuts in interest rates to stimulate borrowing. Lower rates make existing bonds more valuable.
The federal funds rate, the interest on overnight loans between banks, ended at 5.813%, up from 5.438% late Friday.
Currency
The dollar weakened in quiet, post-holiday trading as dealers shrugged off the economic data pointing to continued economic growth over the summer.
Currency traders said the reports failed to spur demand for the dollar.
Earl I. Johnson, a vice president for Harris Trust & Co. in Chicago, said both reports normally are bullish for the dollar because they ease pressure on the Federal Reserve to lower interest rates, which can depress the value of the currency. But he said, “I think a lot of people are still skeptical about the underlying strength in the economy and want to see the unemployment data.”
The Labor Department is expected to release its August jobless figures on Friday.
In New York, the dollar closed at 1.737 German marks, down from 1.747 marks on Friday.
Commodities
Stirrings in the export market sent wheat futures prices a little higher on the Chicago Board of Trade, but corn and soybeans edged lower.
On other markets, precious metals futures advanced while livestock and energy prices declined.
November wheat advanced to a contract high of $3.26 a bushel before the gain was trimmed.
Wheat traders said the market got a boost from rumors that a deal with China is imminent and would involve 2 million tons of the grain under the U.S. export bonus program.
In addition, Venezuela, Mexico and Taiwan are buying or expected to be in the market in the coming days, said Doug Jackson, a grain analyst for Farmers Commodities Corp. in Des Moines, Iowa.
On the New York Commodity Exchange, gold bullion for current delivery settled at $348.30 an ounce, up 20 cents from late Friday; silver soared 9.8 cents to $3.905 an ounce.
Energy futures declined on the New York Mercantile Exchange. October light sweet crude oil edged 2 cents lower and settled at $22.24 a barrel.
Market Roundup, D6
