Dow Falls 21.47 Over Grim Economic News : Market Overview
* Stocks fell as profit taking and worries about the recession’s grip dominated trading. The Dow Jones industrial average dropped 21.47 points to 3,223.39, putting the week’s net loss at 9.39 points.
* Bond yields slipped a bit. Some traders saw new signs of economic weakness as an indication that interest rates in general will drop further.
Stocks
The market again focused on the economy after the Commerce Department said the government’s key economic forecasting gauge kept falling in December, while new-home sales plunged.
The news pushed most major stock market indexes lower with the Dow. But declining issues outnumbered advances by just 5 to 4 on the New York Stock Exchange. Volume edged up to 197.62 million shares from 195.09 million Thursday.
The index of leading indicators--designed to forecast growth in three to six months--dipped by 0.3% in December, a second straight decline.
Though stocks have gotten a lift in recent weeks from better than expected fourth-quarter earnings reports, some analysts fear that firms with bad news to report have been delaying them.
“February should be a down month,” said Dick Stein, analyst at vice president at MKI Securities. “Most of the good (earnings) reports have come--Coca-Cola, Procter & Gamble, Disney. I’m afraid there will be some that are not so good, and they can spook the market.”
Samuel Hallowell, analyst at Van Lieu Capital, said, “There is controversy as to whether we are entering a period of economic growth. (Federal Reserve Chairman) Alan Greenspan is saying we are, and the leading indicators are saying we aren’t.”
Still, most investors seem to be giving the economy the benefit of the doubt: Even when selling occurs, it is hardly dramatic.
But analysts noted that one popular barometer of stocks’ health is offering mixed signals. Historically, a gain in stock prices in January has meant that the market finishes higher for the year. A lousy January has often translated into a down year as well.
For the month, the Dow rose 54.56 points, or 1.7%. Also, the NASDAQ composite index of smaller stocks soared 33.87 points, or 5.8%, to 620.61.
But the NYSE composite index lost 1.4% for the month, and the Standard & Poor’s 500 index dropped 2%.
Among Friday’s highlights:
* Insurance stocks plunged as investors learned that President Bush’s budget proposal seeks to clip the tax-deferral advantage in the popular annuities that many insurers sell.
Aetna Life dropped 2 1/2 to 41 1/2, Conseco plunged 7 to 68 1/4, Broad tumbled 2 1/8 to 17 7/8 and, CNA Financial gave up 2 1/4 to 88 1/4.
* Most brokerage stocks weakened on fears that the bull market might be waning. Merrill Lynch fell 1 1/4 to 57 1/4, Morgan Stanley dropped 1 3/8 to 56 1/2, and Charles Schwab sank 1 3/8 to 31 7/8. But L.A.-based Jefferies Group rose 1 to 15 3/4.
* Many industrial stocks weakened on the depressed leading-indicators report. Alcoa slid 1 7/8 to 64 1/2, Cummins Engine fell 1 1/4 to 57 1/4, Illinois Tool Works dropped 1 3/4 to 64 1/4, Dupont lost 1 1/8 to 46 1/2, and 3M gave up 2 to 91.
* Among technology stocks, Storage Technology continued to rise, adding 4 7/8 to 74 1/2, on upbeat prospects about its new “iceberg” disk product. But Autodesk plummeted 6 1/4 to 28 1/4. Several analysts cut fiscal 1993 earnings estimates after the software company reported disappointing fourth-quarter earnings.
* Polaroid rose 1 1/2 to 28 1/2. Late Thursday the company posted fourth-quarter earnings of $1.16 a share, against 90 cents a year earlier. Meanwhile, Xerox continued to soar on a better than expected earnings report. It rose 2 1/4 to 77 1/8, a new 52-week high.
* Outboard Marine added 1 3/8 to 22 1/4. A Lehman Bros. analyst raised his rating on the boating company to buy from “outperform,” saying orders were soaring from depressed 1991 levels.
* Orion Pictures added 3/8 to 3 3/4, and its junk bonds rocketed, after it received bankruptcy court approval to release two pictures, including Woody Allen’s “Shadows and Fog.”
In overseas trading, stocks rallied a second day in Tokyo. The Nikkei average was up 465.38 points, or 2.2%, to 22,023.05, a gain for the week of 950.9 points. Brokers said market sentiment was shifting away from the malaise that has gripped trading for months, as bargain hunters flocked to buy.
Shares rose on London’s exchange amid rising hopes for interest rate cuts. The Financial Times 100-share average climbed 20.4 points to 2,571.2. In Frankfurt, the DAX index rose 6.58 points to 1,687.49.
In Mexico City, the Bolsa index closed at a record high 1,623.47, up 11.20 points for the day.
Credit
Bonds had a lackluster day, but next week promises more action, analysts said.
The price of the Treasury’s 30-year bond rose 5/16 point, or $3.13 per $1,000. Its yield slipped to 7.75% from 7.78% Thursday.
The bond market is awaiting the release next week of specifics on how large an offering the Treasury plans for mid-February.
Such auctions, held quarterly, can send interest rates soaring until the market absorbs the new bond supply. But some traders believe that bond yields have moved up in anticipation of the auction--and that continued weak economic news means that rates are poised to go lower.
Next week, the government will release unemployment figures for January, a key economic indicator.
The federal funds rate, the rate on overnight loans between banks, rose to 4.50% from 4% Thursday.
Commodities
Precious metals rebounded on New York’s Comex despite economic news that could signal a dwindling need for the metals.
New York spot gold settled $3.60 cents higher at $357 an ounce; March silver was 3.5 cents higher at $4.18 an ounce. Prices had tumbled Thursday.
Energy futures were mixed on the New York Merc. Light, sweet crude for March delivery settled 4 cents higher at $18.90 a barrel.
Currency
The dollar was mixed in New York, many traders avoiding it over fears of central bank intervention.
Analysts said traders worried that the German and Japanese central banks might enter the market to stop the dollar from advancing.
Still, the greenback rose marginally against the Japanese yen in New York, edging up to 125.75 from 125.70 Thursday. Against the German mark the dollar fell to 1.611 from 1.616.
