STOCKS : Dow Falls 3.80 on More Signs of Sluggishness
Strength in cyclical stocks Thursday provided a spark to an otherwise listless market that saw blue chips fall.
The Dow Jones average of 30 industrials dropped 3.80 points to 3,017.22 on Big Board volume of 160.30 million shares, up from 153.91 million Wednesday.
In the broader market, advancing issues outnumbered declines by 5 to 4 on the New York Stock Exchange.
The Commerce Department reported that the gross national product declined at an annual rate of 0.5%, after adjustment for inflation, in the second quarter.
Separately, the Labor Department said initial claims for state unemployment insurance increased by 36,000 during the week ended Sept. 14.
Most analysts said the figures suggest that the recovery continues to be half-hearted.
One said investors seemed to be positive about the economy, however.
“Some of the groups that did well today were ones that wouldn’t unless people felt better about the economy,” said Hugh Johnson, chief investment officer at First Albany Corp. Auto, airline and technology stocks rose, he noted.
While the data depicted a sluggish rebound, “people are betting that if the recovery takes hold, the autos will benefit,” said William LeFevre, strategist at Tucker Anthony.
Johnson said the market is still subject to bouts of computer-program activity, especially with volume at a tepid level.
LeFevre said end-of-quarter investments, or “window dressing,” may nudge stock prices higher in coming sessions.
Among the market highlights:
* Ford Motor rose 7/8 to 30 1/4 and General Motors 7/8 to 37 7/8. International Paper gained 5/8 to 69 3/8 and Georgia-Pacific 1 to 56 3/4. Aluminum Co. of America added 3/4 to 64 1/4 and Phelps Dodge 1 1/4 to 75 1/2.
* Scimed Life tumbled 29 3/4 to 57 1/4 on investor concerns that the company may take its fast-growing express catheter line off the U.S. market because of a patent expected to be issued to Eli Lilly.
* McDonald’s rose 5/8 to 35 1/4. The company said Wednesday that it sees higher third-quarter results.
* Upjohn, which rose Wednesday on takeover speculation, slipped 1 1/8 to 46 3/8 as no bids emerged.
* Compaq Computer jumped 1 to 34 and Intel Corp. 5/8 to 42 1/2. Paine Webber raised ratings on both.
* Transco Energy regained ground, rising 1 1/4 to 18 1/4. Rauscher Pierce raised its rating to buy from neutral, saying a recent selloff in the stock was “overdone.”
* Community Psychiatric lost 2 3/4 to 23 3/4. Donaldson Lufkin & Jenrette took it off its buy list, citing concerns that the current quarter’s results will be weaker than expected.
Retailing stocks were mostly lower for the second straight session, weighed down by fears that consumer spending would remain tight through the fall and holiday seasons.
* Wal-Mart Stores lost 3/8 to 47 1/2, Gap Inc. 2 to 42 5/8, Limited 1/4 to 25 1/2, Kmart 1/2 to 41 1/4 and Sears Roebuck 5/8 to 38 1/8.
Overseas, Tokyo stocks surged on revived expectations of a cut in the discount rate. The 225-share Nikkei average was up 390.66 points or 1.66% to 23,968.08.
German shares finished slightly lower after a dull session. Frankfurt’s 30-share DAX average was off 5.42 points to 1,619.99.
After a flagging Wall Street wiped out the London market’s early gains, the Financial Times 100-share average ended at the day’s low, down 2.2 points at 2,595.6.
Credit
Bond prices advanced modestly amid growing speculation that the Federal Reserve will ease interest rates further to put the economy back on track.
The Treasury’s bellwether 30-year bond rose 1/4 point, or $2.50 per $1,000 in face amount. Its yield, which moves inversely from price, slipped to 7.88% from 7.90% Wednesday.
Traders were focused on a meeting today between Federal Reserve Chairman Alan Greenspan, President Bush and Bush’s top economic policy makers. Analysts expect White House officials to step up the pressure for the Fed to cut interest rates again to boost the struggling economy.
There was also speculation that an easing may emerge from next Tuesday’s meeting of the central bank’s policy-making committee.
The Fed last eased rates two weeks ago.
Bond prices generally rise and yields fall on anticipation of further cuts in interest rates, which boost the value of fixed-income securities.
Bond prices moved up on the gloomy economic reports, but eased a bit after what some analysts said was a knee-jerk reaction.
The federal funds rate, the interest on overnight loans between banks, was at 5.313%, unchanged from Wednesday.
Currency
The dollar advanced in hectic domestic trading.
At first, traders sold it on news of worse-than-expected economic data. But many traders were caught short once the dollar fell and were forced to buy it back in hectic, technically driven trading.
The dollar also drew support from hints that the United States could become involved in military action against Iraq.
“The market does not want to be short dollars in a big way with all the uncertainty in the Gulf, the Soviet Union, in Yugoslavia,” said Randolph Donney, research director at Pegasus Econometric Group in Hoboken, N.J.
The dollar typically is viewed as a safe haven in times of world turmoil.
Donney described the day’s trading as “very choppy and indecisive.”
The dollar rose in New York to 1.688 German marks from 1.681 Wednesday and to 133.95 Japanese yen from 133.22. The British pound was quoted at $1.729, less expensive than Wednesday’s $1.736.
Commodities
Silver futures prices fell sharply as weak economic data and easing Mideast tensions knocked out the market’s main supports.
On other commodity markets, gold futures retreated; grains and soybeans fell; livestock and meat futures were mostly higher, and energy futures were mixed.
Silver for delivery in September tumbled 10.9 cents to $4.108 an ounce on New York’s Commodity Exchange. The more heavily traded December contract dropped 11 cents to $4.155. October gold fell $2.20 to $350.80 an ounce.
Silver’s losses extended a decline that began Wednesday after the metal climbed 18 cents in three sessions.
