FINANCIAL MARKETS : Dow Gives Back 11.62 of Recent Gains : Market Overview
* The stock market gave ground in a busy session, yielding to profit takers even in the midst of more positive economic news. Bond yields were mostly flat.
* Oil prices shot higher as bearish supply data released by the American Petroleum Institute earlier in the week was shrugged off as the weather worsened and as political turmoil in Russia flared.
Stocks
Traders continued to cash in on some of the market’s recent gains, as new data showing a strengthening economy merely bore out investors’ bullishness in October and November.
The Dow Jones industrials, up 47.28 points over the four preceding sessions, dropped 11.62 points to 3,312.19.
Declining issues outnumbered those advancing by about 4 to 3 on the New York Stock Exchange, where volume swelled to 240.64 million shares, up from Wednesday’s 230.06 million.
Profit taking in small stocks was more pronounced: The NASDAQ composite index lost 4.99 points to 658.93. Given that market’s fast run-up over the last two months, analysts said it wasn’t surprising that investors were taking some profits in those stocks.
On the economic front, the Labor Department reported that initial claims for state unemployment insurance dropped 38,000 in the week ended Nov. 21 to their lowest level in more than three years.
The decline, which was much larger than analysts had been expecting, provided emphatic new evidence that the job market is improving.
At the same time, the government said its producer price index of finished goods dropped 0.2% in November, signaling an absence of inflationary pressures in the pipelines of the economy.
If trends such as those continue, analysts say President-elect Bill Clinton will have a lot of maneuvering room to direct his economic policies toward reducing the federal deficit rather than seeking short-term stimulus for business conditions.
Among the market highlights:
* Some technology and biotechnology stocks were hit hard by profit takers. The stocks have led the market in recent months.
Microsoft fell 3 to 89, Borland lost 3/4 to 20 3/4, Autodesk dropped 1 3/8 to 46 3/4, Amgen gave up 1 3/4 to 71 and Biogen fell 1 3/4 to 43 1/4.
IBM, which sank 2 3/4 on Wednesday after Standard & Poor’s Corp. said it may cut the computer giant’s AAA credit rating, eased a further 3/4 to 61 7/8.
“IBM is just under such a cloud of bad news it acts like it will never come out,” said Interstate/Johnson Lane analyst Gerald Simmons. Rumors persist that IBM will cut its dividend.
* Retailers also fell on profit taking. Dayton Hudson fell 1 to 72 1/2, Penney lost 1 1/4 to 75 1/4 and Kmart dropped 3/8 to 25 1/4.
* Imcera tumbled 5 3/4 to 33 3/4 after the maker of human and animal health care products reported the resignation of its president and revised its 1993 earnings growth outlook.
* On the plus side, Micro Warehouse, making its debut in the NASDAQ market, jumped to 23 3/4 after an initial public offering of 2.85 million shares at 18.
Also, QVC Networks jumped 2 1/4 to 33. Barry Diller, former chairman of Fox Inc., agreed to acquire a significant stake in the cable television channel.
* Among Southland issues, Dole Food rocketed 2 3/8 to 31 1/4 after brokerage C.J. Lawrence initiated coverage of the stock with a buy rating. On Wednesday, the shares had sunk 1 1/8 on a downbeat earnings forecast.
Santa Monica-based Veterinary Centers of America gained 3/16 to 5 5/8. The veterinary-hospital operator said food giant H. J. Heinz will purchase a 10% stake in the company, worth $3 million.
Overseas, London’s Financial Times 100-share average fell 24.2 points to 2,726.5 on a steep slide in stock index futures. Frankfurt’s 30-share DAX average closed down 6.11 points at 1,494.48.
Stocks closed higher in Tokyo, with the 225-share Nikkei average rising 95.08 points to 17,501.30.
Commodities
Crude oil prices jumped on wintry weather in the Northeast, expected to boost heating oil demand.
Light, sweet crude oil for delivery in January settled at $19.28 a barrel, up 44 cents, on the New York Mercantile Exchange.
Besides the weather, the market was on edge because of unconfirmed rumors of troop movements in Russia, linked to the political strife between President Boris N. Yeltsin and the country’s hard-line parliament. Russia is a major oil producer.
Daylong protests in Red Square by supporters and opponents of Yeltsin raised concerns that more serious political turmoil could be brewing in Russia, said Naunan Barakat, vice president of energy futures at Merrill Lynch.
The unsettled political situation in Russia also moved precious metals futures a little higher on the Commodity Exchange in New York. February gold was 50 cents higher, at $334.10 an ounce, and March silver was up 2.1 cents, at $3.74 an ounce.
Credit
The Treasury’s 30-year bond yield was 7.42%, down from 7.43% Wednesday, as bond yields in general showed little change.
But short-term rates edged slightly higher on more indications that the economy is picking up--in particular, the report showing a big decline in Americans filing for weekly unemployment benefits.
However, traders questioned the reliability of the unemployment claims number, saying the Thanksgiving holiday might have been responsible for some distortions in the figures.
The drop in November wholesale prices, as reported Thursday, may have contributed to lower long-term interest rates by further dampening worries about inflation.
The federal funds rate, the interest on overnight loans between banks, was 3.125%, down from 3.750% Wednesday.
Currency
The dollar closed mixed against major currencies, rising against the German mark and falling against the Japanese yen.
Low wholesale inflation figures, like those reported Thursday, often spark dollar selling on the belief that they give the Federal Reserve leeway to cut interest rates. However, with the economy improving, the Fed is not likely to push rates lower, traders say.
The dollar rose to 1.58 German marks in New York trading from 1.573 marks Wednesday.
Also in New York trading, the greenback was quoted at 123.70 Japanese yen, down from 124.05 yen.
