STOCKS : Dow Dips 2.02 as Investors Await Earnings
The stock market settled lower in a sluggish session Tuesday as investors stepped aside to wait for the onslaught of third-quarter earnings predictions.
“Most portfolio managers are trying to get a feel for what stocks will have better-than-expected or disappointing earnings,” said Philip Orlando, equity portfolio manager at Unity Management Inc.
The Dow Jones industrial average eased 2.02 points to close at 3,013.19, after rising 29.51 points on Monday.
Declining issues prevailed 843 to 724 on the New York Stock Exchange. Trading was relatively light: Big Board volume came to 168.37 million shares, down from Monday’s 172.56 million.
Many investors were on the sidelines ahead of the Yom Kippur Jewish holiday today and this Friday’s simultaneous expiration of stock-index futures, stock-index options and options contracts. The so-called triple-witching hour can cause broad swings in the market.
“I think a lot of people are focusing on that,” said Alice Sadlo, analyst at McDonald & Co.
Other experts suggest that many investors are moving away from stocks because of concerns about third-quarter earnings. Robert Moseson of Performance Analytics Inc. said he has told clients to cut equity holdings to a minimum of 20% to 30% of their portfolios.
“Earnings are, of course, the big concern,” he said. “I think that for the short-term, the market at best will remain flat, and at worst, down 10%.”
Moseson said that even if stocks resume an uptrend, “I think they will do it with very little conviction.” Share prices have reached overvalued levels, he said. For now, he is advising clients to remain primarily in cash.
Among Tuesday’s highlights:
* Tech stocks continued to churn on earnings worries, but some bargain-hunters moved in. Intel dropped 1/2 to 41, Cadence Design lost 1 1/4 to 17 1/8, and Sun Microsystems fell 1 1/8 to 28 3/4. Merrill Lynch cut its intermediate-term rating on Sun to neutral from above average.
But Apple rebounded 1 3/4 to 49, IBM rose 1 1/4 to 104 7/8, and AST Research added 3/4 to 27 5/8.
* Some retailers were active. Limited jumped 1 1/4 to 27 after the company’s chairman said sales have improved “significantly” since the end of August. Other gainers included House of Fabrics, up 1 1/4 to 32 1/2, and Nordstrom, up 1/2 to 46 1/2. But Price Co. lost 1 1/4 to 58 1/4 in further selling.
* Quaker Oats jumped 3 to 58 1/2 after saying it may repurchase up to 4.3% of its shares. The stock, like most food issues, has been hit by profit taking recently. It had been as high as 66 1/2 this year.
* A few health-care issues came under renewed pressure. Santa Barbara-based Mentor Corp., a maker of medical devices, lost 2 to 14 in active trading, nearing its 1991 low of 12 3/4. It traded as high as 29 5/8 this year. HMO firm PacifiCare Health slipped 7/8 to 27 5/8.
* Merrill Lynch rocketed 2 3/4 to 45 5/8, a 52-week high. An analyst said a lack of speculation in call options on Merrill stock suggested that the shares would go higher. Among other financial issues, financial services firm Broad Inc. gained 5/8 to a 52-week high of 14 1/4.
* Profit taking knocked the Mexico Fund down 1 5/8 to 22 1/4.
* Freeport-McMoran Copper & Gold jumped 5 1/8 to 33 3/8. It found more gold and copper accumulations in Indonesia.
* Morton International slumped 2 1/4 to 54 1/8. Bear Stearns lowered its near-term rating on the company to hold from buy and trimmed fiscal 1992 earnings estimates.
Overseas, Tokyo stocks emerged from a long weekend to close higher. The Nikkei average was up 309.18 points to 23,443.61.
Shares closed stubbornly lower in London with the Financial Times 100-share average falling 11.6 points to 2,594.4.
In Frankfurt, a modest amount of buying in the chemical sector in an otherwise thin market led German shares higher. The DAX average gained 4.80 points to 1,634.55.
Treasury bond prices moved erratically higher as remarks by Federal Reserve officials gave some traders conflicting impressions of the central bank’s monetary direction.
The Treasury’s 30-year bond, which lost 5/32 point in early trading, closed up 5/32 point, or $1.56 per $1,000. Its yield, which moves inversely from price, eased to 7.91% from 7.92% Monday.
Bonds initially fell after televised remarks by Wayne D. Angell, one of seven members of the Federal Reserve Board of Governors, that seemed to suggest the economy was close to the end of recession.
Some traders interpreted the comments as leaving less room for the Fed to ease rates again to stimulate the economy, a move that boosts the value of fixed-income securities such as bonds.
Later in the day the market reversed direction after reported comments by Federal Reserve Bank of Atlanta President Robert Forrestal that the central bank would continue to support economic growth.
“He seemed to create an impression that a further easing is still a possibility,” said William Sullivan, director of money market research for Dean Witter Reynolds Inc.
The federal funds rate, the interest on overnight loans between banks, closed at 5.50%, down from 5.625% late Monday.
The dollar continued its slide as the greenback lost ground to currencies backed by higher interest rates.
Analysts said the German mark dominated foreign exchange trading. Ronald Holzer, a vice president with Harris Trust & Co. in Chicago, said demand for the mark increased as investors poured money into German investments that pay higher yields.
The dollar closed at 1.672 marks in New York, down from 1.673 on Monday.
The dollar has lost favor with traders since it became clear U.S. rates were falling, even before the Federal Reserve lowered its discount rate half a percentage point to 5% last Friday.
“The trend (for the dollar) is clearly down right now, based on interest rate differentials,” Holzer said. Those differentials “will work against the dollar until the U.S. economy shows it’s hit bottom.”
However, the dollar rose against the Japanese yen, closing at 133.85 yen in New York, up from 133.55 on Monday.
Precious metal futures prices rallied amid expectations for lower interest rates and signs that the tide of Soviet metal sales is ebbing.
On New York’s Commodity Exchange, gold for delivery in October rose $2.10 to $347.30 an ounce; December silver rose 6 cents to $4.11 an ounce.
Crude oil futures slipped on the New York Merc on profit taking ahead of a weekly American Petroleum Institute report that showed an unexpectedly large 6-million-barrel drop in U.S. crude oil stocks last week.
Light sweet crude oil for October delivery fell 20 cents to $21.62 a barrel.