Dow Sheds 12 in Selloff Led By Small Stocks : Market Overview
An accelerated selloff in small stocks after weeks of gains knocked the stock market lower. The Dow Jones industrials slipped 12.42 points to 3,193.32.
* Continuing a recent trend, short-term interest rates edged up while long-term rates fell.
Stocks
Stocks opened mixed in choppy trading, then turned decisively lower around midday and declined steadily, pressured by a late round of computer-triggered selling.
The Dow’s small loss, however, was overshadowed by a much bigger setback in the market of smaller stocks: The NASDAQ composite index of smaller issues dropped 6.94 points, or 1.1%, to close at 627.07.
Traders said some investors were merely taking profits after weeks of strong gains in the small-stock market.
Also, traders noted that many investors have headed to the sidelines, as indicated by a lessening in volume in recent days. Several observers said the post-election euphoria has worn off, and market players are now waiting to see just what changes are in store under President-elect Bill Clinton.
On the New York Stock Exchange, losing issues outnumbered gainers by about 5 to 4, as volume totaled 187.66 million shares, up from 175.31 million Monday.
In the NASDAQ market, losers topped winners 11 to 8 on volume of 188 million shares.
Among the market highlights:
* In the technology sector, word that Borland International pledged to keep pace with archrival Microsoft in software pricing sparked fears of a price war.
Borland plunged 4 to 24 3/4, Microsoft dropped 2 3/4 to 90, Lotus fell 1 3/4 to 19 1/2, and Adobe Systems gave up 2 5/8 to 32 1/4.
* Other tech stocks also slid as traders locked in profits from the stocks’ recent strength. Motorola sank 2 1/4 to 95 3/8, Sun Microsystems tumbled 2 1/8 to 31 1/2, and Apple Computer lost 2 1/8 to 55 1/4.
* Biotech stocks were also hit by profit takers. Genzyme dropped 1 1/2 to 44 1/2, Immunex plummeted 3 3/8 to 50, Biogen sank 2 to 42 1/2, and Amgen gave up 1 1/2 to 72 3/4.
* Also in the health care area, Santa Ana-based Tokos Medical collapsed 8 1/2 to 16 1/8. The firm, which provides specialized home care, nursing services and monitoring for high-risk pregnant women, said it won’t be able to meet analysts’ net income estimates of 27 to 32 cents a share for the fourth quarter.
Tokos said it is being hurt by negative publicity about the drug ritodrine. Tokos administers a similar drug, terbutaline, to many of its patients to inhibit labor.
* Airline stocks continued to weaken on worries about 1993 traffic. British Air fell 2 7/8 to 37 3/4, Delta declined 1 1/4 to 52, and UAL, parent of United, lost 1 3/4 to 117 1/8.
* Some classic growth stocks provided the market’s only good news. McDonald’s gained 5/8 to 47 7/8, Philip Morris added 1/2 to 79 7/8, Toys R Us jumped 1 1/8 to 37 1/8, and Pepsico was up 1/2 to 41.
In overseas markets, Frankfurt shares closed mixed, with the DAX average losing 1.90 points to 1,545.05. In London, the Financial Times 100-share average closed 0.4 of a point higher at 2,679.2.
In Tokyo, the losing streak continued as the Nikkei index sank 169.51 points to 15,993.48--the first close below 16,000 since Aug. 20. But at midday today the Nikkei had soared back 484.55 points to 16,478.03.
Credit
Short-term interest rates again crept higher, even as longer-term bond yields fell.
The discount rate on six-month Treasury bills rose to 3.38% from 3.37% Monday.
But the yield on the Treasury’s 30-year bond was 7.53%, down from 7.56% Monday.
John V. Sebastian, an executive vice president with Clayton Brown & Associates in Chicago, said the bond market was apparently reacting in part to a two-day decline in stock prices: Some investors were selling stocks to buy bonds.
But the more pronounced trend in recent days has been the split in direction between short- and long-term rates. Fearing a stronger economy, investors are demanding higher yields on short-term securities. Yet their willingness to leave long-term yields alone suggests investors have no overt fear of inflation resurging with a stronger economy.
The federal funds rate, the interest on overnight loans between banks, fell to 3%, down from 3.25% late Monday.
Currency
The dollar’s recent rally stalled in the absence of economic news.
The dollar has been strengthening against the German mark in recent sessions. The mark weakened Monday after five leading German economists predicted zero growth in western Germany’s economy next year, said Andrew Hodge, vice president at Bank Brussels Lambert.
Hodge said the dollar failed to hold above the key level of 1.6 marks during the session because of technical barriers.
The dollar closed at 1.592 German marks in late New York trading, up from 1.5915 Monday.
The greenback also closed at 124.35 Japanese yen, down from 124.70 yen on Monday.
Commodities
Corn futures prices surged to the highest level in more than seven weeks after the government reported that the harvest is still lagging far behind the normal pace.
Corn for December rose 4.75 cents to $2.158 a bushel, the highest settlement of a near-term contract since Sept. 25.
Meanwhile, oil futures fell moderately on the New York Merc after a strong rally on Monday. Light, sweet crude oil for December delivery fell 11 cents to $20.26 a barrel.
On New York’s Comex, gold closed up 40 cents at $334.30 an ounce, and silver gained 0.6 cent to $3.76.
Market Roundup, D8
