Dow Weathers Losses to Close Barely Changed : Market Overview
* Blue chip stocks edged slightly lower as profit taking before the holiday weekend erased a midday rally. However, many heavy-industry stocks continued to climb.
The Dow Jones industrial average slipped 0.68 point to 3,245.97. For the week it gained 20.57.
* Treasury bond yields closed mixed in an abbreviated trading session, as the market continued to absorb this week’s sale of $36 billion in new T-bonds.
Stocks
Investors continued to weigh their hopes for an economic recovery against the possibility that interest rates won’t drop further.
By the close Friday, stocks that are tied to the economy’s health--the “cyclicals”--showed sharp gains, while old-favorite consumer stocks continued to slide.
Overall, declining issues outnumbered advances 8 to 7 on the New York Stock Exchange. Volume on the Big Board declined to 221.04 million shares from 230.91 million Thursday.
“Instead of going into the old (consumer) stocks, they’re putting new money into cyclicals,” said Jack Solomon, analyst at Bear, Stearns & Co.
But the buying enthusiasm was tempered by concern that the Federal Reserve may delay additional cuts in interest rates. On Thursday, the government reported unexpectedly strong January retail sales.
“The market is showing concern about rates,” said analyst Harry Laubscher of Tucker Anthony. He argued that “the bias is to the downside” in the market, except for brief rallies in cyclical issues.
Looking ahead, analysts said Tuesday’s New Hampshire presidential primary could be a focus.
“I think that will really set the tone. People will start keying in on politics and how Bush is going to do and if there really is a Democratic candidate to challenge him,” said Ken Sheinberg, a trader at County NatWest.
Among the market highlights:
* Auto stocks surged anew, on hopes of a revival in car sales. Chrysler rose 1 1/4 to 16 3/8. Kidder Peabody upgraded its rating on the firm to buy .
Meanwhile, Smith Barney raised its 1992 earnings estimate on Ford, which rose 1 7/8 to 37 1/8, and repeated a strong buy on GM, which was up 1 1/2 to 38 1/8.
* Elsewhere among the cyclicals, UAL, parent of United Airlines, rose 4 3/8 to 146; lumber firm Louisiana Pacific gained 3 1/4 to 60 1/4; Alcoa added 2 1/8 to 67 3/4; Deere rose 1 1/8 to 52 3/4, and Cooper Tire & Rubber jumped 2 1/2 to 49 3/8.
* The big losers again were consumer stocks such as health care issues. Medtronic slumped 3 3/8 to 79 5/8, Merck lost 2 3/4 to 148 1/4, Critical Care fell 2 3/8 to 54 1/4, and Pfizer eased 7/8 to 71 3/4.
Also, Centocor, a diagnostic test-kit maker, dropped 2 3/8 to 46. Robertson Stephens cut its rating on the company and raised its rating on rival Xoma, which added 1 3/4 to 24 1/4.
* Media and entertainment stocks maintained their recent strength. Time Warner surged 3 5/8 to 100 3/4, Mirage Resorts jumped 1 3/8 to 32 3/4, and Marvel Entertainment added 3 1/2 to 66.
* Belding Heminway jumped 8 3/8 to 37 1/8 on speculation of a possible merger or sale of the home sewing product company after it said it had hired an investment bank to explore alternatives.
In overseas trading, stocks slumped in Tokyo for the fourth consecutive day. The Nikkei 225-share average was down 507.16 points to 20,883.86. Analysts said investors are giving up hope that Japanese interest rates will fall in the near term.
Share prices finished weaker on London’s Stock Exchange. The Financial Times 100-share average was down 8.7 points at 2,513.9.
German shares drifted aimlessly. In Frankfurt, the 30-share DAX average closed at 1,676.48, down 4.91 points.
Credit
After Thursday’s big bond selloff, Friday was calm.
The price of the Treasury’s 30-year bond was up 3/16 point, or $1.88 per $1,000, by 2 p.m. EST, when the market closed early in advance of the three-day holiday weekend. The bond’s yield was 7.91%, unchanged from Thursday.
But yields on shorter-term securities were slightly higher.
“The market’s been very volatile,” noted David H. Resler, chief economist at Nomura Securities. “One minute we’re down half a point, the next minute we’re down only a quarter.”
Earlier in the week, as the Treasury sold a huge load of new bonds, yields soared as investors feared that a recovering economy will push rates higher.
But Friday, bonds were helped somewhat by a report that wholesale inflation in January fell 0.3%. A low inflation rate keeps interest rates low. However, traders noted that many investors continued to sell Friday, deciding that there’s less risk in leaving bonds now than in staying in them.
The federal funds rate, the interest charged on overnight loans between banks, fell to 3.938% by midafternoon from 4% Thursday.
Currency
The dollar closed higher in a volatile session in which it plunged on the inflation report, then rallied as the market gave more weight to upbeat retail sales figures issued Thursday.
Revitalized spending by consumers raised hopes that the economy will turn around and that interest rates will rise again. The dollar, like other currencies, draws support from higher or stable rates.
Walter Simon, a vice president at investment banker Julius Baer & Co. in New York, said the dollar was also boosted by rumors that the Fed had entered the market to push the U.S. currency higher.
At the same time, he said, there was concern that central banks might intervene to stop the dollar from climbing too high. The dollar has surged recently amid signs that the economy might be recovering.
The dollar rose to 1.627 German marks in New York from 1.624 Thursday. It climbed to 127.80 Japanese yen from 127.65.
Commodities
Wheat futures prices ended on a strong note, bolstering ideas that the week’s steep loss was just a blip in a bull market.
“Wheat continues to be tight, the winter wheat crop is just starting to come out of dormancy and anything can happen,” said Gerald Zusel, vice president in the grain-trading division of E. D. & F. Man International Futures Inc.
Oat futures also rose on the Chicago Board of Trade, corn futures fell slightly and soybeans were narrowly mixed.
On other commodity markets, oil futures fell, precious metals retreated, and livestock and meat futures were mixed. Trading was generally light as many players got an early start on the long Presidents’ Day weekend.
Wheat for delivery in March rose 4.75 cents to $4.27 a bushel, trimming the contract’s loss for the week to 25.5 cents.
Elsewhere, energy futures dropped on the New York Mercantile Exchange. Light, sweet crude oil for March delivery fell 22 cents to $19.46 a barrel, reflecting lack of an OPEC agreement on crude production cuts to boost prices.
On New York’s Commodity Exchange, gold for February delivery dropped $2.20 to $353.70 an ounce, and March silver fell 4.5 cents to $4.16 an ounce.
Market Roundup, D6
