Dow Dips 0.81 as IBM Shares Continue Fall : Market Overview
The stock market fell slightly in quiet trading, giving back only a bit of Friday’s climb in a session marked by another drop in the shares of International Business Machines.
* Treasury bond yields declined in thin, pre-holiday trading.
Stocks
The Dow Jones industrial average spent much of the day down around 5 points before rallying late in the session to close 0.81 points lower at 3,312.46. The Dow rose 44.04 points Friday.
Declining issues outnumbered gainers by about 9 to 8 on New York Stock Exchange volume totaling 226.22 million shares, up from Friday’s 389.30 million.
IBM, which announced expectations of break-even results and a threat to its dividend last week, continued to have trouble Monday. The company’s stock fell 2 1/2 to 48 7/8, near its lowest level since the 1970s. Most recently, the company said it would bring two managers out of retirement to help run the company.
The stock’s losses amount to 22% since last week.
Analysts described Monday’s drop as a natural pullback after Friday’s rise, which was generated by trading linked to the expiration of stock index futures and options.
Other than some spotty activity in particular stocks, the market was in its usual pre-Christmas lull.
“It’s a typical slow start of a typically slow week,” said Mary Farrell, investment strategist at PaineWebber.
Many market watchers are looking for a traditional end-of-the-year rally in the stock market, said Tom Luker, head of equity trading, at Nikko Securities Co. International Inc.
Among the market highlights:
* Several components of the Dow industrial average rose strongly. JP Morgan rose 1 3/8 to 65 5/8, and Boeing was up 1 1/8 at 36 7/8. But Du Pont fell 7/8 to 50, and Goodyear fell 1 3/8 to 64 1/4.
* Time Warner, whose ailing chairman died Sunday, finished 1/2 higher at 29 3/8. Steven J. Ross was 65 and had been undergoing treatment for prostate cancer for more than a year. The company also announced a reshuffling of the board that forced out many insiders.
* USAir Group fell 1 1/4 to 11 3/4 on expectations that the federal government this week will nix a $750-million investment in the airline by British Airways.
Overseas, German shares climbed 1.6% as strong futures and options buying along with year-end technical trading pushed prices higher. Frankfurt’s 30-share DAX average climbed 23.54 to 1,515.58, its highest close since Dec. 7. The London stock exchange posted record highs in heavy trading, boosting optimism that a year-end rally is firmly underway. The Financial Times 100-share average closed up 18.0 points to 2807.7. Tokyo’s 225-share Nikkei average ended off 35.30 points at 17,645.44.
Credit
The yield on the Treasury’s main 30-year bond was 7.39%, down from 7.42% late Friday, which sent prices up 7/16 point, or $4.38 per $1,000 in face amount. Bond prices rise when the yield falls.
Robert Brusca, chief economist at Nikko Securities International, said the long-term issues made gains on “short covering.”
Traders who “sell short” are gambling that prices will fall. They sell borrowed contracts, hoping to repurchase them later at cheaper prices. When prices rise, these traders buy to cut their losses in what’s called a short-covering rally. That pushes prices up.
In addition, investors are still reacting to recent news that the economy is picking up, said Kevin Flanagan, a vice president and money market economist at Dean Witter in New York.
“There continues to be a feeling that the environment for fixed income securities is favorable,” Flanagan said.
The federal funds rate, the interest on overnight loans between banks, was 3.00%, up from 2.50% late Friday.
Currency
The dollar settled mostly higher Monday in quiet, pre-holiday trading on world currency markets.
Traders said there was virtually no news to move the market. “It certainly feels like people have closed their books for the year,” said Michael Malpede, an analyst with MMS International.
The dollar closed in New York at 1.568 German marks, little changed from Friday’s 1.565 marks. The greenback fell to 123.10 Japanese yen, down from 123.18 yen on Friday.
The British pound was quoted at $1.558, down from $1.567 late Friday.
Commodities
Coffee futures prices reached their highest level in nearly 14 months on New York’s Coffee, Sugar & Cocoa Exchange as the market continued a rally linked to shrinking supplies from Colombia and Brazil.
Green, unroasted coffee for March delivery surged 2.20 cents to 80.90 cents a pound, the highest settlement for near-term deliveries since Oct. 30, 1991.
There was no fresh news behind the move. The surge mainly reflected speculative buying as the price surpassed 80 cents a pound, “an important psychological barrier,” Merrill Lynch analyst Judith Ganes said.
Meanwhile gold dropped $2.90 to $334.00 an ounce on New York’s Commodity Exchange on renewed selling by producers, especially in South Africa, said James Steel, metals analyst with Refco Inc. in New York. Silver slipped 3.4 cents to $3.73 an ounce.
Light, sweet crude rose 8 cents to $19.98 a barrel on the New York Mercantile Exchange.
Market Roundup, D8
