Small Drop in IBM Shares Pulls Dow Index Down 5.94, Analysts Say : Market Overview
* The stock market pulled back slightly in an erratic session, driven down by a late wave of computerized selling and weakness in IBM Corp., reversing two days of gains.
* The price of the long bond jumped as most short-term and intermediate bond prices fell amid word that the Federal Reserve’s chairman seemed uninterested in easing interest rates.
Stocks
The Dow Jones average of 30 industrials, up 64.84 points Monday and Tuesday, slipped back 5.94 to 3,195.48. The average closed out last week at its lowest level of the year.
Declining issues outnumbered advances by about 11 to 10 on New York Stock Exchange volume of 175.90 million shares, down from Tuesday’s 186.65 million.
Traders said the market was pulled lower by a drop in IBM shares, apparently fueled by jitters ahead of its third-quarter results expected today. IBM fell 3/4 to 78.
Richard Meyer of Ladenburg Thalmann said that when IBM “started to become unglued,” the rest of the market followed suit.
“I think the market got a little ahead of itself,” said Robert Walberg, an analyst at MMS International, referring to the two previous days of back-to-back gains.
“We worked off the oversold condition, and so it was time to go back to the primary short-term trend, which is down,” said Alfred Goldman at A.G. Edwards.
“I assume the message of the market is that earnings are going to be disappointing,” he said.
Among the market highlights:
* Coca-Cola rose 5/8 to 38 1/2 in active trading. The company reported third-quarter earnings of 41 cents a share, up from 34 cents a share in the comparable period last year.
* U.S. Surgical jumped 8 1/8 to 64 5/8 after new-product demonstrations that impressed analysts.
* Other losers among the blue chips included General Motors, down 1/2 to 30 3/4; American Telephone & Telegraph, down 3/8 to 42; McDonald’s, down 1/4 to 43; International Paper, down 1 3/4 to 61 1/8; Walt Disney, down 5/8 to 35 1/2, and Boeing, down 1/2 to 36 7/8.
* Precious metals stocks declined broadly as the price of gold drifted lower, reflecting the recent calming of currency markets after a period of financial tumult in Europe. Newmont Gold fell 3/4 to 39 1/8; ASA Ltd. 1/4 to 33 1/2; Homestake Mining 1/8 to 12 3/4, and Battle Mountain Gold 1/2 to 5 1/4. ASA and Battle Mountain traded at 52-week lows.
* Springs Industries tumbled 5 1/8 to 32 7/8. The fabrics and home furnishings company said it expects fourth-quarter earnings to about equal the 75-cent-a-share profit posted for the third quarter.
* Tyco Toys gained 3/4 to 14. The company reported reaching a 10-year licensing agreement to produce toys and other products based on the Children’s Television Workshop’s “Sesame Street” program.
Overseas, stocks declined in Tokyo, hit by weak stock index futures. The 225-share Nikkei average was down 146.64 points to 17,344.03. Share prices in London, with the Financial Times index of 100 stocks closing at 2,574.7, down 10.0 points
The Frankfurt bourse ended with small losses, with the 30-share DAX average losing 6.97 points to close at 1,458.53.
Credit
The price of the Treasury’s main 30-year bond was up 15/32 point, or $4.69 per $1,000 in face amount, late Wednesday. Its yield, which falls when prices rise, was 7.49%, down from 7.53% late Tuesday.
Prices fluctuated all day, with the long bond down 5/32 point at midday.
Alan Greenspan, chairman of the Federal Reserve Board, hedged in Tokyo on whether the U.S. slowdown requires another round of interest rate cuts. Early speculation had Greenspan consulting with the Bank of Japan governor on joint interest rate cuts.
Mike Niederneyer, senior vice president at the Wells Fargo Bank in San Francisco, said that Greenspan felt inflation was at price stability levels. That spurred long-bond buying when yields dropped to 7.50%, Niederneyer said.
The federal funds rate, the interest on overnight loans between banks, rose to 4.50%, up from 3.75% late Tuesday.
Currency
The dollar settled mostly lower in moderate trading on world currency markets.
Traders said the dollar was depressed by word that Germany’s Bundesbank does not plan to hold a press conference after today’s regularly scheduled meeting of its policy-making council.
The news dashed hopes of many dealers that the central bank would announce an interest rate cut after the meeting.
High interest rates overseas make foreign fixed-income securities more attractive to investors, thereby increasing their need for foreign currencies at the expense of the dollar.
In New York, the dollar closed at 121.02 Japanese yen, down from 121.10 on Tuesday. The dollar also fell to 1.461 German marks, down from 1.464.
Commodities
Wheat futures prices reached a four-month high on the Chicago Board of Trade after Russia bid for 1.6 million metric tons. Other grain and soybean futures also rose.
On other commodity markets, precious metals fell; oil futures were mixed, and most livestock and meat futures retreated.
Wheat for December delivery rose 5.50 cents to settle at $3.593 a bushel, the highest settlement for a near-term wheat contract since June 12.
Meanwhile, October gold fell $1.20 to $342.80 an ounce; December silver fell 0.8 cent to $3.707 an ounce on New York’s Commodity Exchange.
Oil futures closed narrowly mixed on the New York Mercantile Exchange, with light, sweet crude oil slipping 1 cent to $22.08 a barrel.
