Bank, Builder Weakness Lops 22.42 Off Dow : Market Overview
Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:
* Weighed down by weak bank and home building shares, stock prices tumbled in late-afternoon selling driven by program trading. The Dow Jones average fell 22.42 points to 3,307.06.
* Emergency measures by the Japanese government to prop up the country’s ailing stock market seemed to pay off with a solid rebound, but many traders said the rise was only a bump on the road to even lower levels.
* Treasury bond prices rose slightly in uneventful trading.
Stocks
Buyers were hesitant to step in amid lack of direction on the economy and uncertainty about the presidential election.
In the broader market, declining issues outnumbered advances 2 to 1 on New York Stock Exchange volume of 186.71 million shares, up from the previous day’s 169.90 million.
Until the late afternoon, the market was quiet and directionless ahead of President Bush’s speech today before the Republican National Convention in Houston. Shares then dropped sharply, ending near the day’s lows.
Bank stocks, which were heavily traded, helped drag down the market, said Hugh Johnson, senior vice president of First Albany Corp. Citicorp fell 1 1/8 to 16 3/4, Chemical Bank dropped 1 3/8 to 32 3/4, Chase Manhattan dipped 1 1/2 to 22 5/8, NationsBank fell 1 1/8 to 45 7/8, and First Interstate dropped 1/2 to 37.
Selling in bank shares was accelerated by a rumor that the nation’s largest mutual fund, Fidelity Investments of Boston, was selling Citicorp and other bank stocks, traders said.
Fidelity spokeswoman Paula Slotkin denied the rumor.
John Heffern, bank analyst for Alex. Brown & Sons, compared the Fidelity rumor to a spark that starts a brush fire.
Generally speaking, Heffern said, stock traders are nervous about any corporation with overvalued stock in a sluggish economy. Bank stocks have been rallying for two years.
Home building stocks also contributed to the slide, dropping after Kaufman & Broad Home said its third-quarter profit will be lower. The single-family home builder was down 2 1/2 at 11 3/4, while Standard Pacific fell 1/2 to 5 7/8.
On Tuesday, the Commerce Department reported that U.S. housing starts fell a worse than expected 2.8% in July.
Investors appeared to shrug off gains overnight in Tokyo and London.
Traders said some of the moves announced by Finance Minister Tsutomu Hata late Tuesday added to the uneasiness that has precipitated stocks’ dropping to six-year lows.
In Tokyo, the 225-issue Nikkei Stock Average gained 341.33 points, or 2.38%, to 14,650.74 Wednesday, one day after it plunged 4.15% to 14,309.41, its lowest close since March 12, 1986.
Some traders said the market responded positively to Hata’s measures to stabilize prices. The steps included a temporary suspension of regulations setting minimum dividends for financial institutions and moves designed to prevent companies from dumping stocks to register capital gains ahead of the closing of half-year accounts next month.
Elsewhere overseas, stocks closed firmer in London, with the Financial Times 100-share average climbing 8.8 to 2,363.5. In Frankfurt, the 30-share DAX average fell 8.50 points to 1,524.72, its lowest finish since 1,497.93 on Aug. 19, 1991.
Among the market highlights:
* Sunbeam-Oster, the consumer goods maker, ended unchanged at 12 1/2 after an initial offering of 20 million shares of common stock priced at $12.50 a share.
* Berlitz International, the language-instruction company, rose 2 to 23 1/2. Japan’s Fukutake Publishing said it will buy 67% of Berlitz.
* Syntex fell 1 1/8 to 29 1/8 after a market survey showed disappointing prescription performance for oral Toradol, the drug company’s new non-narcotic pain reliever.
* Aetna Life & Casualty fell 2 5/8 to 40 3/8--a second straight drop--after the company said it will post a smaller than expected profit on the $1.4-billion sale of its American Re-Insurance subsidiary.
* AMR, parent of American Airlines, dropped 1 3/8 to 57 1/4 after saying it expects heavy third-quarter losses.
* Among blue chips, International Business Machines fell 1 3/8 to 86 5/8, Disney lost 1 3/8 to 34 1/2, and Bristol-Myers Squibb dropped 1 to 69.
Credit
The price of the Treasury’s main 30-year bond rose 5/32 point, or $1.56 per $1,000 in face amount. Its yield, which rises when prices fall, fell to 7.31% from 7.33% Tuesday.
Bonds dipped in the morning after the government said the nation’s merchandise trade deficit narrowed 7.7% in June to $6.59 billion. The improvement was due largely to an increase in aircraft sales.
The Commerce Department said exports, which had fallen for three months, totaled $38.28 billion. That was up 7.2% from $35.72 billion in May and surpassed the record of $37.65 billion set in February.
Traders later pushed up bond prices by buying securities at the lower levels.
The bond market had been concerned that President Bush would unveil a tax-cut proposal in his acceptance speech today at the Republican National Convention. A tax cut would increase the federal deficit, which could require the government to sell more bonds, putting price pressure on existing bonds.
The federal funds rate, the interest on overnight loans between banks, was 3.50%, up from 3% Tuesday.
Currency
The dollar closed mostly lower in listless trading Wednesday, with little news to affect the market.
The greenback rose a bit after the government released the trade report, but it was short-lived because concern about the economy and higher interest rates abroad weighed heavier on traders’ minds, analysts said. The interest rate differential makes dollar-denominated investments less attractive since investments transacted in other currencies can earn more.
In New York, it closed at 126.575 yen, up from 126.15 Tuesday. However, it fell to 1.454 German marks from 1.457.
The British pound was $1.935, more expensive than Tuesday’s $1.931.
Commodities
Orange juice futures plunged on the New York Cotton Exchange on reports that Brazil lowered the price that it will charge its U.S. and European customers.
The new price for Brazilian orange juice will match that being charged by Florida producers.
On other markets, sugar fell, grains and soybeans were mostly lower, precious metals were mixed, energy futures fell, cattle were higher, and pork was mixed.
Frozen concentrated orange juice for November delivery settled 2.50 cents lower at $1.072 a pound on news that Brazilian processors cut their prices to U.S. and European customers.
September light, sweet crude oil fell 10 cents to $21.37 a barrel on the New York Mercantile Exchange.
Gold prices gained on New York’s Commodity Exchange on increased buying by Middle East interests. August gold rose $2.20 to $337.90 an ounce. September silver was unchanged at $3.777 an ounce.
