Late Selloffs Push Dow Down 29.18 : Market Overview
A late afternoon round of selling pushed stocks sharply lower, as International Business Machines plunged further. The Dow Jones industrials sank 29.18 points to 3,255.18, with most of the drop coming after 2 p.m. EST.
* Crude oil prices shot up on the New York Mercantile Exchange on news of a slowdown in U.S. refinery operations and talk of further OPEC production cuts.
Stocks
Embattled IBM led the market lower for a second straight day. The computer giant’s stock, which plummeted 6 1/8 on Tuesday after the firm announced another major restructuring, fell 4 1/4 on Wednesday to a new 11-year low of 51 7/8.
But analysts said the Dow’s 29-point loss was more a result of technical factors than IBM’s woes: Stocks ran into a wave of computer program-generated selling late in the day, triggered by the coming expiration Friday of key stock futures and options contracts.
Besides IBM, two other stocks that make up the Dow average also fell sharply Wednesday. Goodyear dropped 3 1/4 to 66 1/2, and 3M Co. fell 1 3/4 to 102 5/8. The three stocks accounted for about two-thirds of the Dow’s 0.9% drop.
In the broader market, declining issues outnumbered gainers by about 10 to 7 on the New York Stock Exchange, as volume rose to 244.04 million shares from 227.77 million on Tuesday.
“We’re going to see more volatility (today) and Friday,” said Robert L. Kahan, trader at Montgomery Securities in San Francisco. But “once we get through (Friday’s expiration) the market should resume its upward trend.”
Traders noted that smaller stocks generally escaped Wednesday’s selloff. The NASDAQ composite index edged down just 1.12 points to 649.63.
Among the market highlights:
* Technology stocks, which were rattled by IBM’s plunge on Tuesday, were mixed on Wednesday. It may have helped the group that computer chip giant Intel Corp. projected better than expected fourth-quarter earnings, which sent its shares soaring 6 1/8 to an all-time high of 83 1/2 on NASDAQ.
Among other tech issues, Apple lost 1 3/8 to 55, Adobe fell 3/4 to 29 1/2, and Hewlett-Packard eased 5/8 to 63 7/8. But Compaq rose 5/8 to 43, Dell Computer leaped 1 7/8 to 41 5/8, and Motorola added 1 1/2 to 101 3/4.
* Biotech stocks where strong. Immunex rose 1 to 46 1/4 after American Cyanamid agreed to buy 53.5% of the company, creating a new bio-pharmaceutical company. American Cyanamid fell 2 to 56.
Among other biotechs, Amgen rose 1 3/8 to 72 5/8, Gensia jumped 3 to 23, and Genzyme gained 1 3/8 to 44 1/4.
* On the downside, Safety Kleen slumped 6 1/4 to 24 3/4 after the industrial cleaning company indicated that there was weakness throughout its operations in the current quarter.
Also, Marquest Medical tumbled 2 to 3 3/8. The medical products concern said it might file for bankruptcy protection if efforts to raise cash are unsuccessful.
MTC Electronic Technologies, a high-flying little Canadian company that is importing fax machines into China, among other businesses, slumped 5 3/4 to 16 3/4. The company expects to report earnings later this week. On Wednesday, it said it may take legal action regarding what it termed “unsubstantiated rumors” about its business prospects.
* Among Southland issues, medical testing products maker Diagnostic Products fell 3 1/8 to 29 1/2. There was no news. Also, Northrop dropped 1 3/8 to 32 3/8, after having run up sharply in recent weeks.
Overseas, Frankfurt’s DAX index closed down 9.17 points at 1,472.07, weighed down by gloomy news from auto makers Volkswagen and Daimler-Benz. In London, the Financial Times 100-share average added 14.9 points to 2,732.8.
Tokyo stocks were sharply lower, as the Nikkei index fell 212.03 points to 17,268.71. In Hong Kong, the Hang Seng index jumped 100.15 points to 5,415.96, helped by easing worries about China’s row with Britain over the colony’s near-term future.
Commodities
Oil for delivery in January zoomed 46 cents to $19.41 a barrel on the New York Merc, following a weekly American Petroleum Institute report that showed a 3.2 percentage point drop in oil refinery runs last week--to just 86.5% of industry capacity.
The news raised the possibility of increasingly tight supplies of oil.
In addition, the market got a boost from talk that Nigeria will cut its OPEC oil production quota by 10% and other OPEC members will also reduce crude production, but analysts were skeptical.
Besides crude oil prices, gasoline futures prices also jumped. January unleaded gasoline soared 2.26 cents to 54.59 cents a gallon on the Merc.
The rise in oil prices helped support precious metals on New York’s Commodity Exchange, said William O’Neill, futures strategist with Merrill Lynch Futures. Higher oil prices could mean higher inflation, which in theory is bullish for gold.
But O’Neill said most of the metals rally was because of technical factors and buying related to moves in the gold options market.
Gold for near-term delivery gained $3.40 to $337.90 an ounce, while silver rose 3.9 cents to $3.73.
Credit
Treasury bond yields edged lower as traders showed increasing conviction that President-elect Bill Clinton won’t overstimulate the economy enough to prompt a tightening of credit by the Federal Reserve.
The 30-year T-bond’s yield finished the day at 7.43%, down from 7.44% Tuesday. Yields on shorter-term Treasuries fell more.
Yields are sliding “as people become more comfortable with the prospects of modest or no stimulus, and no tightening of Fed policy,” said Robert Giordano, chief economist at Goldman Sachs and Co.
Meanwhile, the Federal Reserve said industrial production increased 0.4% in November, the second straight advance. The October number was revised to a 0.5% gain, up from 0.3%.
Currency
The dollar settled mostly lower on world markets, as the Japanese yen dominated trading.
Analysts said the dollar sold off overnight in foreign markets, and the selling continued when trading shifted to the United States. “The downside looked like the path of least resistance,” said Marc Chandler, an analyst with the advisory firm IDEA.
In New York, the dollar closed at 122.95 Japanese yen and 1.558 German marks, down from 123.95 yen and 1.569 marks respectively on Tuesday.
The British pound was quoted at $1.575 in London, up from $1.568 late Tuesday.
Market Roundup, D6
