Dow Drops 10.27; Bond Auction Hurts : Market Overview

Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:

* Heavy selling of some former growth-stock favorites helped send the market lower. A disappointing auction of 10-year Treasury notes also hurt. The Dow Jones industrials lost 10.27 points to 3,320.83.

* Key foreign markets continued to fall, but the pace of decline slowed. In Tokyo, the Nikkei index fell 48.77 points to 14,773.79, a new 77-month low. Early today the market rallied a bit, with the Nikkei up 61.52 points to 14,835.31 at midday.

* Bond yields inched up after the 10-year T-note auction, with market players looking ahead to today’s sale of 30-year T-bonds.

Stocks

A combination of anxiety about the economy and slow summer trading continued to leave stocks without a sense of direction.

In the broad market, losers topped winners by 8 to 7 on the New York Stock Exchange. Volume came to 177.04 million shares versus 173.94 million Tuesday.

The market showed no visible reaction to the North American free trade agreement, a report of minimal wholesale price inflation in July, or to the plunge in gold prices. Of far greater concern was the hammering some former growth-stock favorites received.

U.S. Surgical, a medical technology firm that had been one of the highest-flying stocks of 1991, sank 3 7/8. Since June 30 the stock has plummeted 25 5/8 as analysts have lowered optimistic expectations of future growth.

Another medical-tech company, Scimed Life, dropped 5 1/2 to 48 1/2. An analyst at brokerage Piper Jaffray warned that the Food and Drug Administration’s slow pace of new-product approvals could hurt Scimed’s growth.

Weakness in former market favorites is weighing heavily on investors because no new stock groups are emerging to lead the market. With the economy as uncertain as ever, investors are simply running out of stock ideas, traders say.

Among the market highlights:

* Gold-mining stocks were big losers as gold’s price sank, reflecting diminishing inflation worries. Newmont Gold slumped 2 7/8 to 40 7/8, Homestake Mining lost 7/8 to 12 3/4, Pegasus Gold dropped 1 1/4 to 14 5/8, and ASA fell 7/8 to 37 7/8.

Other metal producers fell in sympathy. Copper giant Phelps Dodge fell 2 1/8 to 48, nickel producer Inco lost 3/4 to 27 5/8, and steel maker Quanex gave up 1 3/8 to 23.

* Medical stocks following U.S. Surgical and Scimed Life lower included Stryker, down 1 3/4 to 33, and Forest Labs, off 7/8 to 36 3/4.

* California home builders continued to sink on worries about a long-lasting housing slump in the state. Presley Cos. fell 1/2 to 4 1/2, a new all-time low. Kaufman & Broad lost 7/8 to 13 3/4, and Ryland gave up 7/8 to 21 1/2.

* Air carriers took another hit on concerns about the economy. American Air parent AMR lost 1 3/8 to 58 1/2, Delta eased 3/8 to 50 1/8, and Federal Express sank 2 1/4 to 41 1/8. A Robinson Humphrey analyst cut his 1992 earnings estimate for Fed Ex to $2.35 from $3.40.

* Computer memory device maker Dataram plunged 6 3/4 to 8 on the American Stock Exchange. It reported first-quarter earnings of 5 cents a share, down from 13 cents a year ago.

* Among the winners, Parametric jumped 3 to 42 1/4 after obtaining the largest contract in its history. It will provide Caterpillar with 2,000 computer workstations.

* Among Southland firms, Fluor jumped 1 1/2 to 39 1/2, and Jacobs Engineering soared 2 3/4 to 25 1/2. The two engineering firms won a $2.2-billion contract for the cleanup of a former uranium fuel plant in Ohio.

Also, Culver City-based IDB Communications gained 1 5/8 to 16 1/8 after reporting sharply higher quarterly earnings.

And water-vending machine firm Glacier Water jumped 1 3/4 to 12 3/8. It signed a contract to supply machines to some Wal-Mart stores.

In Europe, Frankfurt’s DAX average posted its fourth double-digit fall in a row. It dropped 11.59 points to 1,553.01, a new low for the year.

London’s 100-share Financial Times average slipped to another 18-month closing low, down 6.5 points at 2303.1.

Credit

Bond yields closed mostly higher on muted disappointment over the Treasury’s 10-year note auction.

The price of the Treasury’s 30-year bond fell 3/32 point, or 94 cents per $1,000. Its yield inched up to 7.32% from 7.31% Tuesday.

The Treasury sold new 10-year notes at an average yield of 6.49%, compared to 7.53% at the 10-year note auction May 6.

Marcos Jones, economist at Deutsche Bank, said the auction’s 6.49% yield was “pretty much in line” with expectations. But the “bid-to-cover” ratio was “quite disappointing,” he said.

The “bid-to-cover” is the amount of notes bid for, divided by the amount sold. A higher ratio indicates more investor interest.

The auction was the second leg of a three-part Treasury issue this week. Today, the government will sell 30-year bonds, and many bond traders are betting on greater demand than at the 10-year auction.

The fed funds rate, the rate on overnight loans between banks, rose to 3.25% from 3.125% Tuesday.

Currency

Despite heavy central bank intervention a day earlier to bolster the sagging greenback, the dollar finished mixed against most currencies.

In New York, the dollar fell to 1.463 German marks from 1.467 Tuesday. It also slipped to 127.30 Japanese yen from 128.00.

Although 14 central banks succeeded in intervening enough Tuesday to slow the dollar’s decline, the coordinated effort failed to spark interest in buying or holding dollars on Wednesday, traders said.

Tuesday marked the second time in less than a week that central banks entered the market to support the tumbling dollar.

Wednesday, rather than buying dollars, many traders were just marking time, “trying to get a handle on the levels at which the central banks would enter the market again,” said Mike Faust, senior currency strategist with MMS International.

Commodities

Grain and soybean futures prices fell on the Chicago Board of Trade ahead of a government crop report that, as expected, predicted huge corn and soybean crops.

In the report, issued after the close of trading, the Agriculture Department estimated 1992 corn production at 8.76 billion bushels, compared to last year’s 7.47 billion and the 1985 record of 8.88 billion.

September corn slipped 1.75 cents to $2.15 a bushel, wheat for September fell 5.25 cents to $3.06 a bushel, September oats dropped 2.50 cents to $1.18 a bushel, and August soybeans dropped 7 cents to $5.41 a bushel.

Elsewhere, light, sweet crude oil for September, which fell 23 cents Tuesday, lost another 17 cents to settle at $21.18 per barrel on the New York Merc. Oil prices have been dropping as traders have shown less concern about anti-U.S. rhetoric coming out of Iraq.

Market Roundup, D6