FINANCIAL MARKETS : Dow Rises 1.63, but Profit Taking Is Rife : Market Overview
* Blue chip stocks eked a out minor gain but the broader market fell prey to profit taking. The NASDAQ composite index pulled back after hitting its ninth record close in 10 sessions on Tuesday.
* Hong Kong stocks rebounded sharply, but traders warned the market was being almost totally driven by rumors.
* Treasury bond yields were mostly unchanged as the Federal Reserve reported that the economy is improving modestly but unevenly.
Stocks
The broad market took a breather from its heady recent gains.
The Dow Jones industrial average inched up 1.63 points to 3,323.81, but declining issues outnumbered advances 3 to 2 on the New York Stock Exchange.
“It was time for profit taking,” said Jack Solomon, a technical analyst at Bear Stearns.
On the NASDAQ market of smaller stocks, the composite index dropped 3.20 points to 663.92. Also, the Standard & Poor’s mid-cap index of medium-size companies fell 1.25 points to 156.69.
Trading volume remained active across the market, reaching 229.98 million shares on the Big Board, against 234.40 million Tuesday.
The Federal Reserve’s periodic survey of the economy found that many manufacturers and retailers are seeing better activity, though in many cases the change is moderate. But that’s not a surprise to investors, analysts note.
Among the market highlights:
* Defense stocks stole the spotlight, responding positively to the latest wave of consolidation in the industry. Lockheed jumped 3 1/2 to 55 3/4 and General Dynamics climbed 2 7/8 to 103 7/8 after Lockheed agreed to buy General Dynamics’ jet fighter business.
* On the downside, retailing stocks fell amid talk that the market has anticipated strong Christmas spending, so the stocks are vulnerable to any disappointments. Limited fell 7/8 to 26 3/4. It was among 11 specialty retailers downgraded by Merrill Lynch.
Other losers included Dayton Hudson, off 1 5/8 to 73 1/2; Penney, down 1 3/8 to 76 1/2; Tandy, off 1 1/8 to 30; Sport Chalet, down 3/4 to 8, and Nordstrom, which lost 1 1/4 to 35.
* Also losing ground were airlines, which have been dashed lately on worries about still-slow passenger bookings. AMR, parent of American, fell 2 7/8 to 60 5/8, Delta lost 1 7/8 to 51 3/8, and United parent UAL dropped 3 to 118 1/2.
* Among blue chips, IBM plunged 2 3/4 to 62 5/8 after the Wall Street Journal reported the company is pondering massive new restructuring moves.
* Despite the general market pullback, one issue demonstrated that investors’ appetite for perceived “hot stocks” remains strong. Fresh Choice, a Santa Clara, Calif.-based restaurateur, went public at 13 and quickly rocketed to close at 24 1/2 on the NASDAQ. Its restaurants feature salads, hot pasta dishes, soups and other meals.
Analysts were unable to explain the stock’s incredible popularity, except to note that other new restaurant stocks have soared to stratospheric levels this year.
* Among Southland issues, Dole Food sank 1 1/8 to 28 7/8 after it estimated 1992 earnings will total just $15 million, down from $134 million in 1991. It blamed banana price wars and one-time charges.
Biotech giant Amgen slumped 2 1/4 to 72 3/4. Prudential Securities cut its rating on the stock to hold from buy . The firm’s biotech analyst said Amgen management was “more insistent than before” in guiding estimates for 1993 earnings downward, to about $2.60 a share from an expected $2.10 this year.
U.S. Alcohol Testing soared 13/16 to 2 in heavy trading on the Amex. An investment group apparently filed notification that it owned more than 5% of the firm’s stock, but the company said it did not yet know the group’s identity.
Overseas, London’s Financial Times 100 index fell 19.1 points to 2,750.7, while Frankfurt’s DAX index eased 7.65 points to 1,500.59.
Tokyo’s Nikkei average rose 124.37 points to 17,406.22.
In Hong Kong, stocks got a big lift on rumors--quickly denied by the government--that Gov. Chris Patten might soften his controversial push for wider democracy in the colony’s waning years. That push has caused a war of words between British and Chinese authorities, riling the stock market.
The Hang Seng index shot up 136.89 points to 5,339.25. Early today it was off 5.99 points.
Credit
Bond yields closed mostly unchanged, as traders paid little mind to the Fed report showing a mostly slow-growing economy.
The yield on the Treasury’s 30-year bond was flat at 7.43%.
Today the government is set to report the November producer price index, which traders expect to rise just 0.1%.
The fed funds rate, the rate on overnight loans between banks, rose to 3 3/4% from 2 5/8% Tuesday.
Other Markets
The dollar ended higher in thin trading, scoring a big gain against the pound after British government advisers recommended a cut in interest rates there.
It took $1.566 to buy a pound at the close in New York, down from $1.60 Tuesday.
The dollar also rose to 1.573 German marks from 1.559, and to 124.05 Japanese yen from 123.77.
Elsewhere, light, sweet crude oil for January was flat at $18.84 a barrel on the New York Merc.
On the Comex, near-term gold fell $1.80 to $333.60 an ounce; silver closed at $3.69, down 5.1 cents.
Market Roundup, D8
