Oil Futures Drop; Dow Loses 4.32 : Market Overview
Crude oil futures prices sank on a report that Saudi Arabia will refuse to cut production when OPEC meets this week.
* A cluster of blue chip winners--including IBM, General Electric and Westinghouse--helped the Dow Jones industrial average stave off heavy selling, but NASDAQ stocks were crushed by losses in technology issues.
* Treasury bond yields rose, although they retreated a bit by the close of trading because of strong demand at an auction of new two-year notes.
Commodities
The Saudi report sent light, sweet crude oil for delivery in January down 36 cents a barrel to $20.20 on the New York Mercantile Exchange.
Thomas Blakeslee, energy strategist at Brody, White & Co., said the report that the Saudis will refuse to cut their crude oil production came from the newsletter Middle East Economic Survey.
The 13-nation Organization of Petroleum Exporting Countries meets Wednesday in Vienna. Observers had expected the 13 member nations to agree to cut production from the current level of above 25 million barrels a day to lift prices--so the newsletter report was a shock.
OPEC has been pumping oil at 1 million barrels daily above the target set at its last meeting. “If they can come to any agreement and at least leave the meeting with a handshake, then prices will move higher,” Blakeslee said.
Complicating matters for traders is that the OPEC meeting occurs before the start of the four-day Thanksgiving weekend.
Meanwhile, gold fell 80 cents to $334.40 an ounce on the New York Commodity Exchange. Silver finished 1 cent lower at $3.747 an ounce.
Stocks
The Dow Jones average, up 17.83 points Friday, slipped back 4.32 points to 3,223.04.
Declining issues outnumbered advances 6 to 5 on the New York Stock Exchange. Big Board volume fell to 192.53 million shares from 257.46 million Friday.
A 6 1/2-point tumble in the flagship issue Microsoft Corp. helped send the NASDAQ index down 3.95 points, or 0.6%, to 638.65.
Goldman Sachs cut its fiscal 1993 and 1994 estimates on Microsoft, citing concerns about software pricing and the business climate in Europe. Microsoft said it has no plans to cut prices in Europe.
“There were lots of jolts in both directions,” Hersh Cohen, president of Shearson Asset Management, said of the day’s trading.
Noting gains in Westinghouse, which announced a restructuring, and in General Electric, which is selling its aerospace business to Martin Marietta, Robert Stovall of Stovall/21st Advisers said: “There’s been a bit of recovery in some of the shattered icons.”
Westinghouse Electric jumped 2 3/8 to 12 1/8 as investors responded positively to its restructuring plans.
General Electric rose 2 1/8 to 82 1/8, and Martin Marietta added 5 5/8 to 63 1/4 on the news that Martin Marietta is buying GE’s aerospace business for $3.05 billion.
Other market highlights:
* Among computer software and systems stocks traded on NASDAQ, Borland International fell 1 5/8 to 22 1/4, Novell 1 1/4 to 30, Lotus Development 3/4 to 20 1/4, Sun Microsystems 1 3/8 to 31 1/8 and System Software 2 3/4 to 31 1/4.
* Energy stocks were weak on the report that the Saudis were resisting the idea of cutting their oil production. Exxon dropped 1 to 59 3/4, Amoco 1 1/4 to 49 3/4, Atlantic Richfield 2 1/2 to 109 3/8, Mobil 7/8 to 61 1/2, Chevron 7/8 to 68 7/8 and Texaco 7/8 to 60.
* Among oil field service and drilling stocks, Schlumberger lost 1 1/2 to 61 1/2, Halliburton 1 to 30 1/2 and Baker Hughes 1/4 to 20 1/4.
Overseas, Frankfurt’s 30-share DAX average fell 13.87 points to 1,530.89. In London, the Financial Times 100-share average lost 9.5 points to 2,722.9. The Tokyo stock exchange was closed for a national holiday.
In Mexico City, the Bolsa index shot up 44.78 points, or 2.7%, to 1,679.33 after President Carlos Salinas de Gortari said he is willing to open new talks on trade with President-elect Bill Clinton.
Credit
The yield on the Treasury’s main 30-year bond rose to 7.54% from 7.53% Friday. Its price, which moves inversely to the yield, fell 4/32 point, or $1.25 per $1,000 in face amount.
There was little economic news to affect the market. Instead, traders bid yields up as they awaited the results of the Treasury’s afternoon auction of $15 billion in two-year notes.
Demand for the notes was strong, giving the overall market a lift, said Susan Talbot, a money market analyst with Thomson Financial.
The federal funds rate, the interest on overnight loans between banks, was 3%, unchanged from Friday.
Currency
The dollar settled mixed in lackluster trading on world currency markets.
Trading was light, with Japanese markets closed for a holiday. The dollar advanced in Europe, but gave up those gains when trading shifted to domestic markets.
In New York, the greenback settled at 1.597 German marks, down from 1.605 Friday. It slipped to 124.05 Japanese yen from 124.35. The British pound rose to $1.522 from Friday’s $1.512.
Market Roundup, D8
