Dow Declines 4.55 Despite Late Buying : Market Overview
Highlights of Monday’s market activity, compiled from Times staff and wire reports:
* Sharp overnight declines in key foreign markets sent U.S. stocks broadly lower, though late-afternoon buying trimmed losses.
The Dow Jones industrial average, down nearly 30 points at its morning low, finished with a 4.55-point loss at 3,280.80.
* Oil prices took a wild ride, plunging early in the day, then rocketing later on doubts that Iraqi oil will begin to flow anytime soon.
Stocks
Wall Street, still reeling from last week’s selloff, was primed for another decline after the Japanese stock market came under renewed pressure overnight, tumbling to another 5 1/2-year low.
In Tokyo, the Nikkei stock index plunged 598.65 points, or 3.6%, to close Monday at 15,921.22.
That decline was followed by heavy losses in many European markets: In London, the Financial Times 100-share average slumped 34.5 points to 2,550.3; in Paris, the CAC-40 index lost 28.15 points to 1,885.77.
When trading opened in New York, the selling began immediately. The Dow, off 128 points between June 1 and last Friday, showed a loss of between 20 and 30 points for much of Monday.
But toward the close buyers began to reappear. However, analysts said much of the buying was related to “short covering” by traders who had correctly bet on a market decline in recent weeks.
“It’s not that there’s so many sellers, it’s just that there’s an absence of buyers,” said analyst Nelson Gold at brokerage Interstate-Johnson Lane. “People are just holding on to their wallets,” he said, citing worries about the economy, corporate profits and the presidential election.
Despite the Dow’s afternoon climb, losing stocks beat winners by more than 9 to 5 on the New York Stock Exchange. Volume came to 169.63 million shares.
And the small-stock market continued to be hammered. The NASDAQ composite index fell 4.47 points to 549.73, a 0.8% decline.
Meanwhile, in Mexico City, stocks suffered another big setback after last week’s roller-coaster. The Bolsa index tumbled 61.91 points, or 3.7%, to 1,624.34.
NYSE-traded shares of Telmex, the Mexican phone company, sank 2 7/8 to 44 7/8 after Barron’s magazine published negative comments by an analyst who questioned Telmex’s growth prospects.
Among the market highlights:
* Energy stocks were broadly lower, following the deep decline in oil prices early in the day. Though oil recovered all of its losses by the close, many energy stocks remained down.
Arco fell 1 3/8 to 113 3/8, Mobil lost 1 to 63 1/2, Unocal slid 1 to 24 5/8 and Amoco eased 1/2 to 48 3/8.
Among oil field services issues, Schlumberger fell 1 1/4 to 64 3/4, Halliburton slipped 1/4 to 27 3/8 and Baker Hughes lost 5/8 to 21 1/8.
* Many industrial stocks weakened on continuing worries about the economy. Allied-Signal dropped 1 to 53 1/2, Dupont fell 1 to 49 3/4, Caterpillar gave up 1 1/4 to 53 1/4, Kennametal slid 7/8 to 32 and Deere lost 1 to 40 5/8.
* Some recently battered growth stocks returned to favor. Drug giant Merck was a major reason for the Dow index’s recovery. Merck got federal approval to market its new drug Proscar, for treatment of prostate enlargement. The stock jumped 2 1/4 to 50 1/2.
Other growth-stock winners included Pfizer, up 2 5/8 to 72 1/8; Schering-Plough, up 1 5/8 to 53 1/8; Procter & Gamble, up 7/8 to 47 1/4, and General Mills, up 1 3/8 to 64 1/2.
* Best Buy jumped 3 1/4 to 17 7/8. The electronics and appliance retailer reported sharply higher earnings.
* Heart Technology plummeted 2 5/8 to 8 3/4. The firm recalled its Rotablator coronary device as it sought to find what it described as a defect in the manufacturing process.
Credit
Bond yields finished mixed after a lackluster session that focused on the worldwide decline in stocks.
The price of the Treasury’s main 30-year bond fell 3/32 point, or 94 cents per $1,000. Its yield rose to 7.84% from 7.83% Friday.
Bond prices took their cue from the stock market, rising after stocks in Japan tumbled again and the U.S. market traded lower.
But the stock market recovered late in the day, taking the momentum out of what was a surprisingly mild bond market rally.
Stock market declines generally stimulate buying in government securities, which are viewed as safe-haven investments.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.813%, up from Friday’s 3.563%.
Currency
The dollar declined overnight in Asian and European trading, and the selling continued when activity shifted to domestic markets as the dollar lost ground against all major currencies except the yen.
“All the economic data coming out of Japan is looking worse and worse,” said Randolph Donney, research director at Pegasus Econometric Group in Hoboken, N.J.
Further pressuring the yen was the steep drop in Tokyo stocks.
In New York, the dollar closed at 127.15 yen, up from 127.00 yen on Friday. But against the German mark the dollar closed at 1.567, down from 1.573 Friday.
The mark “is shining as a bright light in Europe even with the uncertainty” surrounding European political and economic union, Donney said.
Commodities
Crude oil plunged by 44 cents a barrel in early trading amid speculation that Iraqi and U.N. officials would agree on a plan to let Iraq start selling oil again.
But when the U.N. and Iraqi officials concluded a meeting in Vienna with a statement indicating they had reached a preliminary agreement that requires final approval by the U.N. Security Council and the Iraqi government, traders began buying oil.
In New York, light, sweet crude for delivery in July settled 22 cents higher at $22.48 a barrel.
Many players seemed surprised by the sudden, sharp rally. “It was all over the place, absolutely nuts,” said Peter Beutel, oil analyst at Pegasus Econometric Group Inc.
Elsewhere, precious metals rebounded from Friday’s losses. Gold prices rose on political unrest in South Africa and the Commonwealth of Independent States. Gold is a traditional safe haven during times of international upheaval.
On New York’s Commodity Exchange, June gold rose $2.90 to $343.70 an ounce, and July silver advanced 1.5 cents to $4.038 an ounce. On the New York Mercantile Exchange, July platinum reversed a weeklong decline and advanced $2.50 an ounce to $360.10.
Market Roundup, D8
