Market Absorbs the Shock : L.A. Riots Slow Trading in New York as Dow Slips 23.03

The shock waves from the Southland riots reached Wall Street on Friday, slowing trading as many financial companies in New York City let workers go home early.

Meanwhile, in the market’s usual opportunistic style, investors were already looking for companies that would be hurt by--or would benefit from--the disaster in Los Angeles. Home builders, insurers, banks and security services firms were high on the discussion list.

Overall, the stock market suffered a slight decline after a three-day rally this week that virtually ignored social strife in Los Angeles and other cities.

The Dow Jones industrial average slid 23.03 points to 3,336.09 on Friday. The Dow had risen more than 50 points in the previous three trading sessions and finished Thursday at 3,359.12, the second-highest close ever.

Despite the turmoil in Los Angeles, “the market has already made a decision that this is not a serious problem economically” for the nation as a whole, said Bradlee Perry, chairman of the Babson mutual funds in Boston.

Even so, traders in New York said that city was bracing for trouble as demonstrations against the Rodney King verdict got underway there.

Rumors of disturbances in New York--most of them unconfirmed--were enough to frighten some major companies into closing early. Among the firms sending employees home an hour or two before normal quitting time were American Express, Chemical Banking, Salomon Inc., Kidder, Peabody & Co. and First Boston.

The New York Stock Exchange stayed on regular hours, but the Commodity Exchange and the Coffee, Sugar & Cocoa Exchange allowed workers to leave early.

A bond trader at brokerage Aubrey Lanston & Co. in New York, reached around 3 p.m. EDT, said the firm’s bond-trading floor had already cleared out completely.

Ironically, the Pacific Stock Exchange said its Los Angeles and San Francisco trading floors were operating normally--despite the riots that hit both cities’ downtown areas over the last two days.

“All of our members are here,” said Nancy Olmstead, spokeswoman for the PSE in Los Angeles.

But the early departures from New York slowed trading to 177.3 million shares on the NYSE, down from 223.6 million on Thursday. The May Day holiday in Europe also depressed U.S. trading.

On the Big Board, declining stocks outnumbered rising issues 9 to 8. In the NASDAQ market of mostly smaller stocks, however, winners edged losers by a small number.

Among the market highlights:

* Insurance stocks were mostly lower as investors feared as-yet uncalculated losses from the riots in Southern California. Aetna fell 1 to 41 5/8, USF&G; dropped 5/8 to 10 3/4, General Re gave up 2 3/8 to 78 5/8, and Transamerica lost 1 3/4 to 43 5/8.

* Shares of two major security-services companies continued to advance, as requests poured in for security guards in Los Angeles and other cities. Wackenhut jumped 2 to 30, and Pinkerton’s rose 1 1/4 to 25 1/2.

* David Shulman, chief stock strategist for Salomon Bros. in New York, suggested to his traders that the Los Angeles riots might accelerate the suburbanization of the city, which he said could benefit home builders Kaufman & Broad and Ryland Group. K&B; was flat at 17 3/4, but Ryland rose 1/2 to 22 5/8.

Shulman also suggested that the riots might accelerate the out-migration from Southern California to the Pacific Northwest, which he said could benefit Northwest banks such as Washington Mutual, which fell 1/8 to 20 1/2, and U. S. Bancorp., which added 1/8 to 23 7/8.

* Many stocks on Friday simply succumbed to profit taking after recent gains, traders said. Some industrial issues may have been hurt by a mixed report from the national purchasing managers group, which reported that the industrial economy grew in April but at a slowing rate.

Among industrial issues losing ground were Alcoa, off 1 1/4 to 76 1/8; GE, down 7/8 to 75 3/4; Owens-Corning, which fell 1 1/8 to 34 1/8, and Caterpillar, off 7/8 to 55 1/4.

In overseas markets, London’s Financial Times-100 index added 5.7 points to 2,659.8. Frankfurt and other key European markets were closed for the May Day holiday.

In Tokyo, the Nikkei index lost 87.32 points to 17,303.39.

In Hong Kong, the Hang Seng index rocketed 114.64 points to a record 5,484.21 after China’s senior hard-line leader spoke in favor of economic reforms.

Credit

Bond yields eased across the board as traders viewed the purchasing managers’ latest report as an indication of a slowing economy--which could lead to lower interest rates.

Trading slowed to a crawl by early afternoon, as many of the large Wall Street investment houses and broker-dealers dismissed employees early out fear of spreading urban unrest.

The Treasury’s key 30-year issue ended up 3/8 point, or $3.75 per $1,000. Its yield fell to 8% from 8.03% Thursday.

Market strategists said the major reason for bond traders’ optimism was a monthly report by the National Assn. of Purchasing Management that showed a slowdown in the expansion of U.S. manufacturing in April.

“The report was surprisingly weak,” said Douglas McCallister, bond strategist at Prudential Securities. “It shows the economy is still expanding, but not as much as originally thought.”

The easing of bond yields was welcomed on Wall Street. The Treasury will sell $36 billion worth of new bonds next week. Falling yields Friday helped calm some fears that demand at next week’s sale may be weak.

The federal funds rate, the interest on overnight loans between banks, was quoted at 3 5/8%, down from 3 13/16% Thursday.

Commodities

Grain and soybean futures prices rose sharply on the Chicago Board of Trade after some private meteorologists predicted hot, dry weather in the Corn Belt during the month of May.

“Everybody’s getting panicky over the weather,” said Doug Jackson, analyst with Farmers Commodities in Des Moines.

Wheat for delivery in May rose 5 3/4 cents to settle at $3.78 a bushel; May soybeans climbed 9 1/2 cents to $5.83 3/4 a bushel.

Elsewhere, platinum futures surged on the New York Merc, extending Thursday’s strong gains on news that the Big Three U.S. auto makers are increasing production this quarter. Platinum is heavily used in auto parts.

July platinum deliveries rose $8 to $355.40 a troy ounce.

On New York’s Comex, May gold rose $1.40 to $339 a troy ounce; May silver rose 0.9 cent to $4.

Meanwhile, light sweet crude oil for June ended unchanged at $20.85 a barrel on the New York Merc.

Currency

The dollar fell in thin trading, as many banks in New York abruptly closed Friday afternoon because of riot fears. The May Day holiday in Europe also slowed trading.

In New York, the dollar fell to 132.65 Japanese yen from 133.25 Thursday. It also dropped to 1.641 German marks, down from 1.648.