Dull Day for Dow, Up 3.36; Bond Yield Falls : Market Overview
Highlights of Tuesday’s market activity, compiled from Times staff and wire reports:
* Blue chips staged a turnaround in the final hour of trading to eke out a small gain in what amounted to a dull session. The Dow Jones industrials added 3.36 points to 3,307.92, though once again the broad market lost ground.
* A report showing surprisingly weak sales of new homes in March helped the bond market rally after Monday’s selloff.
Stocks
Stocks opened on a weak note and remained down for most of the session, until a late wave of technical buying pulled the Dow higher.
Declining issues still outnumbered gaining ones by about 9 to 7 on the New York Stock Exchange, where volume came to 189.22 million shares, up from Monday’s 172.90 million.
Erosion among secondary and technology issues led the market down. Significantly, the NASDAQ composite index of smaller stocks fell below its 200-day moving average. It dropped 6.61 points, or 1.2%, to 560.33.
A drop below a long-term moving average often can cause heavy technical selling by investors who trade the market according to technical signals on charts.
Reports confirming economic growth in the first quarter and showing a sharp rise in consumer confidence in April failed to draw many new investors to stocks.
Though growth in gross domestic product was at a 2% annual rate in the first quarter, that is “below what you would normally get at this stage in a recovery,” said Hugh Johnson, chief investment officer at First Albany Co.
Thus, he said, “the recovery in (corporate) earnings is clear” but appears somewhat uninspiring to many investors.
Some traders also said the growing popularity of businessman Ross Perot as a possible presidential candidate was frightening some investors, who fear that he could siphon votes from President Bush and open the way for a Democratic victory.
Among the market highlights:
* Technology stocks were bashed again, as investors continued to sell many of the issues that ran up sharply earlier in the year. Microsoft slumped 4 1/4 to 109 after saying that its earnings growth may slow to 25% in the next year, from the recent 50% pace. Analysts said that while long-term investors should still be thrilled with 25% growth, short-term traders are exiting the stock.
Other tech stocks falling included Apple, down 1 1/2 to 54 1/4; Hewlett-Packard, off 1 7/8 to 75 3/8; Novell, off 1 3/4 to 49 3/4, and Cabletron Systems, which lost 2 3/4 to 48.
* Biotech stocks also were mostly weaker. Centocor fell 1 3/8 to 13 after its CEO resigned, and the troubled company said it may sell a stake in itself to another firm to raise capital.
* Home builder and mortgage company stocks fell on the March drop in new-home sales. Centex tumbled 3 1/2 to 41 7/8, Kaufman & Broad lost 5/8 to 16 5/8, Ryland fell 3/4 to 20 1/2, and mortgage banker Countrywide Credit slid 1 3/8 to 27 1/4.
* Some industrial stocks that gained in the first quarter were hit by profit taking. Superior Industries fell 2 3/4 to 49 1/2, Cooper Industries plunged 5 1/8 to 51 7/8, and Whirlpool gave up 2 5/8 to 42 7/8.
But many other industrial names continued to be strong. General Motors rose 3/8 to 40 3/8 after reporting its first quarterly profit in nearly two years. USX-U.S. Steel surged 1 1/4 to 24 7/8 after its quarterly profit exceeded expectations. Another winner was Cummins Engine, up 1 7/8 to 64 3/8.
* Battered oil stocks were a pocket of strength. Unocal jumped 1 1/8 to 25 1/4 in active trading after the company announced plans to cut debt. Mobil rose 7/8 to 64 1/8, Halliburton added 1/2 to 25 1/4, and Amoco was up 1 3/8 to 47.
In overseas trading, Tokyo stocks continued to build on a rally, with the 225-share Nikkei average up 76.88 points to 17,527.40.
In London, the Financial Times 100-share average lost 7.2 to 2,651.0. In Frankfurt, the DAX average fell 6.28 points to 1,735.94.
Credit
Bond yields fell across the board as the slowdown in sales of new homes gave hope that the Federal Reserve will ease credit again.
The price of the Treasury’s 30-year bond gained 11/16 point, or $6.88 per $1,000. That sent the yield down to 8.04% from 8.11% Monday.
The data on home sales was far weaker than expected. The government said sales of new homes slumped 14.8% in March, the biggest drop in more than 10 years.
The report was viewed as so poor as to guarantee the Fed will maintain a loose credit policy, said Kathleen Stephanson, economist at Donaldson, Lufkin & Jenrette Securities Corp. Interest rates had been rising in recent weeks on the fear that the Fed would be forced to tighten credit if the economy began to recover too fast.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.50%, down from 3.875% late Monday.
Currency
The dollar rose against most foreign currencies in overseas trading but retreated later to end mixed in the United States, weakened by the plunge in domestic housing sales that suggested more economic weakness.
In New York, the dollar closed at 1.654 German marks, unchanged from Monday. Against the Japanese yen, the dollar fetched 133.20, up from 132.95 Monday.
Commodities
World coffee and cocoa prices sank to their lowest levels since the early 1970s as cash-strapped producers sold off supplies, analysts said.
Analysts detected heavy selling of cocoa, particularly from the leading supplier, the Ivory Coast, and it seemed there was little hope for a short-term recovery.
Prices for both commodities have been falling for some time, as supplies outstripped demand.
On the New York Coffee, Sugar and Cocoa Exchange, cocoa fell Tuesday to $888 a metric ton, while coffee was at 63.85 cents a pound, the cheapest since the early 1970s, traders said.
Elsewhere, light, sweet crude oil for June delivery rose 12 cents to $20.41 a barrel on the New York Mercantile Exchange.
Precious metal futures were barely changed on New York’s Commodity Exchange. April gold rose 30 cents to $336.90 an ounce; May silver edged down 0.3 cent to $3.94 an ounce.
Market Roundup, D10
