Dow Falls 13.87 on Subdued Bond Market : Market Overview
* Blue chip stocks pulled back from Wednesday’s record close in lackluster trading, while smaller stocks managed to gain ground on new demand. The Dow Jones average, up 25.49 points Wednesday, slipped back 13.87 to 3,269.45. But the NASDAQ over-the-counter market kept to the plus column with a 1.55-point rise to 633.95.
* Treasury bond prices closed little changed as traders ignored two economic reports that normally would be favorable for the market.
Stocks
Traders said the stock market was undermined slightly by the subdued Treasury bond market after a rally in both markets on Wednesday.
“I think you’ve got some profit taking from some of yesterday’s big winners,” said Robert Stovall, president of Stovall/21st Advisers.
Advancing issues outnumbered declines by more than 9 to 8 on the New York Stock Exchange, while Big Board volume came to 215.12 million shares, down from Wednesday’s 241.50 million.
“If you looked at the individual groups, you could see they were very mixed,” said Hugh Johnson, chief investment officer at First Albany Corp.
“The market managed the profit taking well. With the bond market not following through, you’d expect some profit taking,” he added.
The market was overshadowed by growing disagreement over taxes in Washington.
The House of Representatives sent the Senate its tax plan Wednesday, voting to give middle-income earners a tax break paid for by the wealthy. But President Bush said he will not sign the House tax bill.
“I think the signs are growing that Congress will deliver a tax revenue bill by March 20 (the deadline),” said Stovall.
“The market may not commit on new investments until then. This just extends the waiting game the market has been in.”
Among the market highlights:
* HCA-Hospital Corp., a leading hospital management corporation, topped the Big Board volume list with over 8 million shares. It closed at 23 1/8 after being priced at 21 1/2 a share. Goldman Sachs was the underwriter and 34 million shares were offered.
* Microsoft jumped 2 7/8 to 124 7/8. An analyst repeated an aggressive buy rating on the company after meeting with Microsoft officials at an industry conference in Arizona.
* Shares of Gensia Pharmaceuticals soared 12 1/2 to 62 after the company released favorable data on its cardiovascular drug Arasine.
* Warner Lambert sank 3 7/8 to 65. The Food and Drug Administration questioned the potential for approval of the sustained release version of its cholesterol lowering drug Lopid.
* Philips, Europe’s biggest consumer electronics maker, added 2 7/8 to 20 3/8 after reporting a better-than-expected 1991 profit of $645 million.
* Sun Microsystems rose 7/8 to 34 3/8. Prudential Securities repeated a buy rating on the company, citing strong business in its third quarter and good prospects for new products.
* Time Warner rose 4 1/2 to 104 5/8 after company executives gave an upbeat presentation at a Wall Street investment conference.
Overseas, investor appetite for previously neglected issues buoyed the Frankfurt market to its highest close since early August, 1990. The DAX 30-share average ended 12.63 points higher at 1,749.90.
In Tokyo, stocks closed slightly lower after a meandering day. The 225-share Nikkei average was down 31.07 points to 21,333.70.
On London’s Stock Exchange, the Financial Times 100-share average closed 3.0 points lower at 2,562.0.
Credit
The bond market had little reaction to two economic reports that normally could have boosted prices. Both indicated economic weakness, favorable to bonds since it improves the chances the Federal Reserve will lower interest rates.
The price of the Treasury’s key 30-year bond, which soared 13/16 point Wednesday, fell 1/32 point, or 31 cents per $1,000 in face amount, by closing. Its yield remained at about 7.84%.
The Labor Department said jobless claims climbed in mid-February by 7,000 as 459,000 Americans made first-time trips to the unemployment office. Many economists expected the number would fall.
The National Assn. of Realtors said sales of existing homes fell 1.5% in January, the first decline in four months.
The federal funds rate, the interest on overnight loans between banks, was quoted at 4.125%, up from 3.875% late Wednesday.
Currency
The dollar fell, weakened by the economic news that suggested U.S. interest rates could decline further.
Money traders said a primary force weakening the dollar was a series of economic reports over the past few days that painted at best a mixed picture of the U.S. economy.
U.S. economic weakness implies that interest rates will fall, which makes dollar-denominated investments worth less and hurts the dollar’s value.
Some money traders said they also sold dollars because of partisan wrangling over how to stimulate the economy.
In New York, the dollar fetched 129.00 Japanese yen, down from 129.20 Wednesday. Against the German mark, the dollar fell to 1.635 marks, down from 1.645 late Wednesday.
The British pound rose $1.765, from its $1.755 value Wednesday.
Commodities
Gold led a rally of precious metals futures on New York’s Commodity Exchange on news of a large gold purchase by Middle Eastern interests.
Gold futures climbed $4.40 after news of the purchase in London of about 300,000 ounces of gold. Prices eased a bit toward the close of trading.
Also, a weaker dollar and heavy fund buying of silver futures helped precious metals, said analyst James Steel of Refco Inc. in New York.
Gold futures for March delivery settled $4.20 higher at $353.90 an ounce; March silver was 4.2 cents higher at $4.103 an ounce.
On other markets, grains and soybean futures were mixed, livestock and pork futures were higher, and energy futures were mostly higher.
Meanwhile, energy futures were mixed on the New York Mercantile Exchange with light, sweet crude oil for April delivery rising 29 cents higher to $18.75 a barrel.
