Dow Index Falls 10.95 in Light Trading : Market Overview
Highlights of Monday’s market activity, compiled from Times staff and wire reports:
* Stocks dipped on profit taking in quiet holiday trading as investors took a breather after seven record closes in the last two weeks. The Dow Jones industrial average slid 10.95 points to close at 3,254.03.
* The dollar fell sharply against the Japanese yen and was narrowly lower against other major currencies in light holiday trading.
Stocks
Stock market activity was restrained by the absence of many market participants observing a holiday for the birthday of Martin Luther King Jr.
In the broader market, declining issues outnumbered advances by about 5 to 4 on the New York Stock Exchange. Volume on the Big Board came to 180.9 million shares, down sharply from Friday’s 287.37 million.
The American Stock Exchange index rose 0.01 to 415.33, a record closing high.
Analysts said the market’s recent highs had made stocks expensive, and called the drop in the Dow index a slight correction.
“The market is technically overextended,” said Jim Schroeder at MMS International. “Rotating into cyclicals has been overdone for the near-term. It’s just a matter of time before we see a sizable correction.”
Among the market highlights:
* Cypress Semiconductor dropped 3 5/8 to 14 1/8 after reporting lower quarterly earnings.
* Home Depot lost 1 3/4 to 64 7/8, U.S. Surgical fell 7 to 117 1/4, Wal-Mart dropped 1 3/8 to 55 3/4, and Coca-Cola weakened 1 1/2 to 72 5/8.
* Upjohn was actively traded, off 1 5/8 at 41 1/2. A New York Times story quoted critics of the company as saying it concealed data about the side effects of its sleep medication Halcion.
Upjohn said it hid no information and Halcion had no more side effects than other sleeping aids.
* UAL dropped 4 to 152. The company said its fourth-quarter results would show the largest quarterly loss it has ever posted.
* Among other airline stocks, AMR lost 5/8 to 71 7/8, and Southwest Airlines was down 1 at 35. But Delta Air Lines rose 7/8 to 73 1/2, and USAir Group added 3/8 to 16 1/4.
Overseas, Frankfurt’s 30-share DAX average ended up 6.18 points at 1,677.17, its highest closing level since June 26, 1991.
London’s Financial Times 100-share average closed 8.2 points up at 2,544.9, buoyed by stronger pharmaceutical stocks and futures-linked buying.
Credit
The government bond market and banks were closed for Martin Luther King Day, but some businesses were open.
Bond prices rose in extremely light trading in a session abbreviated by the observance of the birthday of Martin Luther King Jr.
The price of the Treasury’s bellwether 30-year bond rose 11/32 point, or $3.44 per face amount, at closing. Its yield, which falls as the price rises, sank to 7.58% from 7.61% late Friday.
The rise in bond prices was insignificant in view of the light volume and a trading session that lasted until about noon, said Dan Bernstein, research analyst for Bridgewater Associates Inc. in Wilton, Conn. He said bond prices rose on the strength of overseas trading and buying that began Friday.
The federal funds rate, the interest on overnight loans between banks remained at late Friday’s level 2.5%.
Currency
Analysts said the dollar remained vulnerable against the yen after Friday’s intervention by the Federal Reserve and the Bank of Japan. The two central banks sold dollars to push the greenback lower against the Japanese yen.
Traders are “not in any big hurry to test the central banks’ resolve after the big selloff Friday,” said Mike Faust, a foreign exchange analyst with MMS International.
The dollar closed in New York at 1.591 German marks, down from 1.592 marks Friday, and at 123.25 Japanese yen, compared to 124.55 yen Friday, in a session that ended at 2 p.m. EST.
Commodities
The recent slide in orange juice futures prices steepened on dwindling prospects for a hard freeze in the Florida citrus belt.
On other commodity markets, coffee futures rose; energy futures fell; livestock and meat futures retreated; grains and soybeans were mixed, and precious metals were mixed.
The Martin Luther King Jr. Day holiday produced thin trading, increasing the potential for broad price changes.
Orange juice for delivery in January tumbled 5.10 cents to $1.451 a pound on the New York Cotton Exchange. The loss--the market’s fifth straight--extended OJ’s cumulative decline since Jan. 13 to 14.45 cents, or about 9%.
Meanwhile, energy futures fell on the New York Mercantile Exchange despite news that Iran and Algeria had joined several other OPEC members in making small cuts in oil production to firm up prices. Light, sweet crude oil for February delivery dropped 27 cents to $18.89 a barrel.
Gold futures rose strongly on New York’s Commodity Exchange with February gold rising $3.70 to $358.20 an ounce; January silver fell 1.3 cents to $4.257 an ounce.
Market Roundup, D10
