A nervous calm settled on Wall Street on Wednesday after the turmoil of the previous three sessions, with the Dow Jones industrial average slipping 1.56 points to 2,930.01. Broader market indexes were mixed, however.
Meanwhile, yields on long-term Treasury bonds fell back, recovering from an early rise after a strong government report on October housing starts briefly spooked bond buyers.
The Dow stock average rose as much as 20 points in early trading before slipping back. The general calm was a welcome respite for traders, who saw the Dow plunge 120.31 points last Friday, rise 29.52 on Monday and fall 41.15 on Tuesday.
But the market’s continuing uneasiness about the economy--which sparked last Friday’s free fall--was evident in the broad market: Losing issues outnumbered winners 9 to 8 on the New York Stock Exchange. Volume came to 196.16 million shares, down from 241.43 million Tuesday.
Even so, “This is probably a very respectable showing in view of the decline we saw Friday and (Tuesday),” said Alice Sadlo, analyst at McDonald & Co. “It really hung in there fairly well.”
A strong report on housing starts and rebounds in key overseas stock markets helped allay some investors’ fears of a new global economic slump in 1992.
Analysts were also heartened by a strong showing in the NASDAQ market for smaller stocks. Gaining issues outnumbered losers there by 10 to 7, and the composite index rose 2.65 points to 526.12 after falling 11.26 points on Tuesday.
Still, experts caution that the market remains shaken from last Friday’s plunge, and that much more selling could ensue. For professional money managers, “When you get into a situation such as we’ve gotten into, the first inclination is that ‘I want to get paid at the end of the year.’ You want to nail down your profits,” said Lon Gorman, a managing director with First Boston Corp.
Among the market highlights:
* The Dow’s loss would have been greater except for the 6 1/8 surge in shares of drug firm Merck, to a new 1991 high of 145. A medical study showing new benefits of a Merck cholesterol-lowering drug spurred enthusiasm.
Overall, medical care stocks were mixed. Some biotech shares rebounded from their recent pounding. U.S. Bioscience soared 9 5/8 to 56 3/4 on news that its Ethyol product will receive an earlier-than-usual review by the Food and Drug Administration.
Other biotech winners included Biogen, up 3 to 41 1/4; Alza, up 1 1/2 to 77 1/2; and Centocor, up 1 3/4 to 48 1/2.
But Santa Monica-based hospital firm National Medical Enterprises plunged 1 5/8 to 13 3/8, a new 1991 low, in heavy trading. The firm projected that earnings this year will be $1.60 a share, down from $1.70 expected previously.
* A rise in October housing starts nationally lifted home builders. Kaufman & Broad jumped 1 3/8 to 14 5/8, and Ryland rose 7/8 to 22 1/2.
* But if home sales are rising, there’s still no optimism about new-car sales. GM fell 1 to 30 5/8, and Ford hit a new 1991 low of 24 3/8, down 3/4. Auto parts maker Eaton fell 2 to 55 7/8.
* Brokerage stocks were among the weakest issues, on worries that the bull market is over. Morgan Stanley lost 2 1/2 to 55 1/4, Paine Webber fell 1 1/2 to 28 1/4, and Merrill Lynch dropped 1 1/8 to 50 7/8.
* Among stocks moving on analyst mentions, Litton Industries gained 2 1/4 to 87 after Merrill Lynch reiterated a buy recommendation on the defense firm. But Merrill downgraded computer maker AST Research to hold. The stock fell 1/2 to 16 3/4.
* Software firm AutoDesk lost 5 1/2 to 33. Several analysts cut estimates after it reported weaker-than-expected third-quarter earnings of 65 cents a share, compared to 63 cents a year ago.
* Fabric retailer Hancock Fabrics tumbled 1 7/8 to 14 3/4 on a disappointing earnings report. The news helped pull down Sherman Oaks-based rival House of Fabrics, which lost 1 5/8 to 34 5/8.
* Among NASDAQ stocks helping to pull that market up, software firm Borland International jumped 4 1/4 to 72 1/4, video conferencing firm PictureTel leaped 3 to 37 1/2, retailer Price Co. gained 1 1/2 to 56 3/4, and Birtcher Medical added 1 to 17 1/2.
Overseas, Japanese stocks eased but showed surprising strength after Wall Street’s Tuesday drop. In Tokyo, the Nikkei average lost 127.00 points to 23,199.86.
Stocks finished higher in London. The Financial Times 100-share average closed up 9.5 points to 2,472.6. The Frankfurt market was closed for a holiday.
Bond yields rose after the government reported that housing starts increased 7.6% last month, the biggest gain in eight months.
But buyers returned late in the day to push the yield on the Treasury’s 30-year bond down to 7.90% from 7.91% Tuesday.
The spurt in home starts may be a sign that the housing industry will lead the economy out of recession. While some investors fear that will mean rising interest rates, bullish sentiment about still-lower rates held sway late Wednesday.
Indeed, yields on 3- and 6-month T-bills continued to slide Wednesday. And the fed funds rate, the rate on overnight loans between banks, was 4.63%, compared to 4.69% Tuesday.
The dollar advanced on world currency markets, but trading was light as dealers turned their attention to Wall Street.
In New York, the dollar strengthened to 1.600 German marks from 1.597 Tuesday. It was at 129.80 Japanese yen, unchanged from Tuesday.
Wheat futures rose sharply on the Chicago Board of Trade on news that President Bush had approved $1.25 billion in loan guarantees for Soviet purchases of U.S. grain. Wheat for delivery in December jumped 13 cents to settle at $3.67 a bushel.
Elsewhere, platinum futures surged on the New York Merc on news that key Western nations will offer the Soviet Union a $1-billion loan and defer $6 billion in interest payments.
The Soviet Union is one of the world’s largest producers of gold and platinum. The assistance could prevent the Soviets from selling precious metals for hard currency.
January platinum rose $4.80 to $373.20 an ounce; December gold rose 30 cents to $364.70; December silver rose 1 cent to $4.08.
Oil futures rallied on the New York Merc on news that the nation’s gasoline supply was at a 20-year low. Light, sweet crude oil for delivery in December settled at $22.22 per barrel, up 22 cents.
Market Roundup, D6