Dow Off 16.10 to Lowest Close in 3 Months
Market Overview
Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:
* The Dow Jones industrial average dropped to a three-month closing low, uninspired by a few tentative signs of improvement in the economy. The Dow lost 16.10 points to 2,900.04.
* Interest rates were mixed, with long-term bond yields rising slightly on muted inflation fears.
Stocks
The Dow’s close was its lowest since 2,898.03 on Aug. 19--the day news broke of the attempted coup in the Soviet Union.
On the New York Stock Exchange, declining issues outnumbered advances by an 8 to 7 ratio. Trading shrank to 167.72 million shares from 213.81 million Tuesday.
Though the government reported some signs of economic health--a fall in initial claims for state unemployment insurance and increases in durable goods orders and personal income--the reports weren’t enough to persuade investors that business prospects had improved substantially.
The market weakened badly late in the day on a surprise selling wave, traders said.
Wednesday was disappointing particularly because “frequently in the past, you have a lift on the day before and the day after Thanksgiving,” said analyst Robert Stovall of Stovall/21st Advisers.
“I think this is an extension of the faded confidence from consumers spreading to businessmen to investors,” he said.
Wall Street will be open for business Friday, but the post-Thanksgiving session is typically one of the slowest of the year.
Among the market highlights:
* IBM, up 2 3/4 Tuesday on word of a major restructuring, tumbled 3 5/8 to 94 1/4 as investors reconsidered. IBM is one of the Dow 30 stocks, and its drop accounted for close to half the Dow’s loss.
* Another Dow loser was Philip Morris, which slumped 1 5/8 to 68 1/8. The company said it will take fourth-quarter charges for restructuring in its food operations and for a new accounting method covering benefits for retirees.
* While industrial stocks fell, utilities surged as investors sought safe, high-dividend stocks. The Dow utility index rose 2.51 points to 219.08, led by American Electric Power, up 3/4 to 31 1/2; Detroit Edison, up 5/8 to 33 3/8, and Public Service Enterprises, up 1/2 to 28 1/8.
* Retailers were broadly lower heading into what many analysts believe will be a difficult Christmas season. Limited dropped 7/8 to 24 5/8, Sears fell 1 to 36, Penney eased 1 to 49 1/4 and House of Fabrics slid 1 3/8 to 32. But Gap rose 3/4 to 53 1/4.
* Ever-volatile biotech stocks rallied. Immune Response soared 4 5/8 to 34 3/8, Cetus gained 3/4 to 18 and Synergen added 1 to 46 3/4.
Also, Scimed Life Systems rocketed 8 3/4 to 67 after the medical instrument firm reached a settlement of a patent litigation suit.
Elsewhere in the health sector, Southland-based drug distributor Bergen Brunswig tumbled 2 3/4 to 17 3/8 on a weak profit projection.
* Among defense issues, McDonnell Douglas dropped 2 3/4 to 69 3/4. Saudi Arabia said it doesn’t intend to press its plan to buy 72 F-15 fighter planes. Meanwhile, Litton Industries surged 2 1/4 to 89. The company said its oil-field services unit has begun a 1,000-mile seismic exploration project in Mongolia.
* Time Warner eased 1 1/8 to 83 on word that Chairman Steven Ross has prostate cancer.
* Despite the overall market gloom, investors still seemed interested in some stocks. Southland gainers included computer firm Teradata, up 1 3/4 to 22 3/4; communications firm IDB Communications, up 3/4 to 14 1/4; and toy maker Mattel, up 1/2 to 28 7/8.
Overseas, London stocks fell on new coup rumors in the Soviet Union. The Financial Times 100 index slid 24 points to 2,447.5. In Frankfurt, the DAX index lost 16.71 points to 1,586.16.
In Tokyo, the Nikkei average resumed its downtrend, falling 138.81 points to 22,973.28.
Credit
The yield on the Treasury’s key 30-year bond inched up to 7.96% from 7.94% Tuesday. But yields on most shorter-term bonds eased.
Traders initially sold bonds on Wednesday’s better economic signals, such as higher durable goods orders in October. If the economy is improving, it may suggest higher inflation ahead and preclude the possibility of lower interest rates.
But by the close most bond yields were lower as traders stuck with a bearish economic outlook.
The fed funds rate, the rate on overnight loans between banks, was at 3 3/4%, down from Tuesday’s 4 5/8%. Wednesdays often produce large swings in the rate.
Currency
The dollar ended at 1.614 German marks and 129.90 Japanese yen, little changed from 1.611 marks and 130.10 yen Tuesday. Trading was light.
The dollar had surged Tuesday after the German economics minister voiced support for a stronger U.S. currency.
Commodities
The oil market rebounded from losses earlier this week after OPEC decided in a widely anticipated move to keep pumping at the same level all winter.
January crude soared 33 cents to $21.35 a barrel on the New York Mercantile Exchange.
While OPEC members agreed to maintain output ceilings through the winter, many analysts said the cartel had not taken into account Iraq’s re-entry into the market. Others said OPEC overestimated the world’s thirst for oil.
Meanwhile, gold prices were lifted by renewed rumblings about the possibility of another right-wing coup in the Soviet Union. December gold contracts on New York’s Comex rose $1.60 to $367.90 an ounce; but December silver slipped 1.5 cents to $4.06.
