Earnings Worries Push Dow Average Down 1.89 : Market Overview
Highlights of Wednesday’s market activity, as compiled from Times staff and wire reports:
* The stock market closed out a session of erratic swings with only small overall changes, still beset by worries about impending second-quarter earnings reports and the economy. The Dow Jones industrial average finished the day down 1.89 points at 3,293.28.
* Prices of government bonds fell, with intermediate-range securities getting hit the hardest as a Treasury auction of seven-year notes sapped some demand from the secondary market.
Stocks
The market’s focus was on upcomimg earnings results, particularly airlines and California banks, the newest sectors to weaken.
In the broader market, declining issues outnumbered advances by about 9 to 8 on the New York Stock Exchange, on Big Board volume of 201.03 million shares, down from Tuesday’s 226.05 million.
The market attracted late buying on talk that stocks may be oversold after the Dow index plunged nearly 45 points Tuesday. It was the steepest loss in three months.
Analysts said traders were looking ahead uneasily to corporate earnings reports for the second quarter, which are due in large numbers over the next few weeks.
A recent run of weak economic statistics has prompted fears that many companies’ results will be disappointing, reversing a generally positive trend for the first quarter of the year.
Among the market highlights:
* Losers among the blue chips included General Motors, down 5/8 to 40 1/8; Boeing, down 3/4 to 40 3/8; Goodyear Tire & Rubber, down 2 1/4 to 65 3/8; International Paper, down 3/8 to 65 3/8, and McDonald’s, down 7/8 at 44.
Boeing lost out to Airbus Industrie of Europe in the competition for a big aircraft leasing deal with UAL Corp.’s United Airlines subsidiary.
* Eastman Kodak rose 1 1/4 to 41 1/4, while Ball Corp. fell 3/8 to 32 5/8. Ball said it was in preliminary talks with Kodak toward the possible purchase of its Federal Systems division, which sells equipment and services to the government.
* Nike, which reported higher quarterly profits, posted one of the day’s standout showings, jumping 6 3/8 to 66 1/8. L.A. Gear, which announced a quarterly loss, fell 1 5/8 to 10 5/8.
* Exabyte, another NASDAQ market issue, climbed 2 3/4 to 29 3/8. The company reported earnings for the second quarter ended June 27 of 54 cents a share, up from 30 cents a share in the corresponding period a year ago.
* Freight and shipping stocks were weak, pressured by worries about the state of economic recovery. Roadway Services, an OTC issue, fell 3 3/4 to 62; Carolina Freight 1/4 to 12 1/2, and Airborne Freight 3/4 to 13 1/8. Fruehauf Trailer, which makes truck trailers and parts, lost 3/8 to 7 1/2.
* Duty Free International gained 1 to 21 3/4. Directors authorized the company to buy back as many as 1 million shares.
* Loral Corp. rose 1/2 to 32 7/8. The company said a 2-million-share repurchase program would add about 10 cents to its annual earnings per share.
Meanwhile, Mexican stocks ended lower, with the Bolsa price index ending down 31.86 points at 1,582.33 in quiet trading. Some late buying helped pull the market up from lows hit earlier when investors bailed out of Cementos Mexicanos.
Share prices on the London stock exchange closed lower again, with the Financial Times 100-share average dropping 21.1 points to 2,472.6.
Frankfurt’s 30-share DAX average sank 16.33 points to 1,751.18, its lowest close since May 15.
Tokyo’s 225-share Nikkei average finished the day up 140.71 points at 16,600.26.
Credit
The price of the government’s bellwether 30-year bond was down 1/32 point, or 31 cents per $1,000 in face amount. Its yield was unchanged from late Tuesday’s 7.60%.
Bond prices have steadily advanced since last Thursday, when the Federal Reserve cut two key interest rates in response to an unemployment report that called into question the strength of the economic recovery. Lower rates tend to boost the price of bonds.
“The seven-year note auction provided a little bit of excuse for investors to ring the cash register a bit,” said Kevin Flanagan, money market economist for Dean Witter Reynolds Inc.
Demand was brisk for the Treasury’s $9.77 billion worth of notes, with yields falling to their lowest level since January.
The federal funds rate, the interest on overnight loans between banks, rose to 6.00% from 2.75% late Tuesday.
Currency
The dollar was mixed in subdued trading, a sharp change from Tuesday’s hectic dealings that saw the currency plunge.
Traders said the dollar rose early in the day after comments from Treasury Secretary Nicholas F. Brady. Speaking in Munich at the gathering of the world’s leading industrial nations, Brady said the United States isn’t “seeking to depreciate the dollar.”
That prompted some traders to buy dollars to cover short positions, or bets that the currency’s value would decline. But the activity was short-lived.
In New York, the dollar closed at 1.489 German marks, down from Tuesday’s 1.490. The dollar rose to 124.70 Japanese yen, up from 124.10.
Commodities
Cocoa futures registered big gains in heavy trading on New York’s Coffee, Sugar & Cocoa Exchange on technical buying and concerns about dry weather in cocoa-producing regions of West Africa.
Also providing a boost to prices was the lack of sales by cocoa producers, particularly the Ivory Coast and Ghana.
Cocoa for delivery in September settled $55 higher at $1,036 per metric ton.
On other markets, grains and soybeans were mostly lower, livestock and meat declined, precious metals gained, and energy futures were mixed.
The August delivery price of benchmark light, sweet crude settled at $21.41 a barrel, up 1 cent from Monday, at the New York Mercantile Exchange.
Silver and gold futures settled higher on New York’s Commodity Exchange, with August gold rising $1.30 to $348.40 an ounce, and September silver rising 1 cent to close at $3.905 an ounce.
