Dow Sags 22.42 as NASDAQ Soars : Market Overview
* Blue chip stocks closed sharply lower after a year-end rally stalled on a late bout of program selling.
* Bond yields fell in thin trading after a surprising leap in consumer confidence.
Stocks
The Dow Jones average of 30 industrials, up almost 20 points at midday, was down 22.42 points to 3,310.84 by the close.
But advancing issues outnumbered declines by about 6 to 5 on the New York Stock Exchange. Big Board volume came to an estimated 227.59 million shares, up from about 143.97 million in the previous session.
The NASDAQ composite index closed at a record 669.01, up 2.76 points. It surpassed the previous closing high of 667.12 on Dec. 8.
Late selling in some prominent NYSE blue chips offset early bullish reaction to a series of positive economic reports.
The Conference Board, an independent business research organization, reported that its index of consumer confidence jumped to 78.3 in December from a revised 65.6 the month before.
It was the second two-digit increase in a row for the index, apparently reflecting the election of a new President and signs of improvement in the job market.
Heading into the last hour of trading, Wall Street’s Johnson Redbook Service reported Christmas season retail sales figures that it characterized as a “bonanza not equaled since 1983.”
Separately, the National Assn. of Realtors said sales of existing single-family homes rose 5.8% in November to their highest level in nearly six years.
Among the highlights:
- Retailing stocks, which advanced broadly early in the session, turned mixed in late trading, apparently on fears that the Johnson Redbook numbers might signal an unsustainable burst of demand rather than a lasting improvement. Federated Department Stores rose 7/8 to 19 7/8, and Sears, Roebuck gained 5/8 to 45 5/8, while Wal-Mart Stores dropped 1/2 to 64 3/8. Kmart lost 5/8 to 24 3/8, and Gap Inc. fell 1/4 to 33.
- International Business Machines made a big contribution to the Dow’s loss, falling 2 to 49 3/4 after analysts quoted in the Wall Street Journal declared that the battered stock might not have bottomed out yet.
- Other declines of a point or more among the Dow 30 included Minnesota Mining & Manufacturing, down 2 3/4 to 100 1/8, and Goodyear Tire & Rubber, down 1 3/4 to 67 7/8.
- Bristol-Myers Squibb climbed 3/4 to 68 1/2 in active trading. The company’s drug, Taxol, for treatment of advanced ovarian cancer, received final approval from the Food and Drug Administration.
Glaxo Holdings jumped 1 1/8 to 23 3/8, topping the NYSE most-active list on volume of more than 6 million shares. The FDA approved Glaxo’s drug, sumatriptan, for the treatment of migraine headaches.
- Other gainers among the blue chips included American Telephone & Telegraph, up 3/8 to 52 1/4; Boeing, up 3/4 to 39 5/8, and Caterpillar, up 5/8 at 54 3/8. American Express was unchanged at 24 3/4.
- Healthcare Compare, traded in the NASDAQ market, dropped 1 to 29 3/4. The company warned that it would have “considerable” expenses for hiring and training of staff in the first quarter.
- Among NASDAQ technology stocks, Intel dropped 1 3/8 to 89; Microsoft 1 to 86 1/2, and Cisco Systems 2 1/2 to 77 1/2. But Novell rose 7/8 to 28 3/4, and Oracle Systems added 1/2 to 28 1/4.
In overseas trading, London shares surged in the last hour of trading on the back of gains on Wall Street. The Financial Times index of 100 leading shares ended up 20.3 points to a record close of 2,847.8.
In Frankfurt, the 30-share DAX index ended 2.38 points lower at 1,542.23.
In Tokyo, stocks closed moderately higher in a technical rebound after Monday’s drop, but volume remained thin with most investors away on holiday. The 225-share Nikkei average was up 97.02 points to 17,285.64.
Credit
Treasury bond yields fell Tuesday, prompted by technical factors and optimism from positive economic figures.
The yield on the Treasury’s main 30-year bond fell to 7.36%, down from 7.40% Monday. Its price, which rises when yields fall, rose 1/2 point, or $5 per $1,000 in face amount.
Kevin Flanagan, a vice president and money market economist at Dean Witter Reynolds Inc., said short-covering was mostly responsible for Tuesday’s price gains.
Investors 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, which pushes prices up further.
Traders also said more evidence that the economy is continuing to pick up helped bond prices Tuesday.
The federal funds rate, the interest on overnight loans between banks, was 2%, down from 3.375% late Monday. The rate tends to fluctuate as banks reach the close of two-week reporting periods, which end on Wednesdays.
Currency
The dollar drifted lower against most major currencies Tuesday as the market ignored the several bullish economic reports that should have provided a boost.
Walter Simon, a vice president and currency trader at Bank Julius Baer & Co. in New York, said the market’s movements at the end of year, as traders close out books, often bear little relationship to economic news.
In New York, a dollar bought 124.73 yen by late afternoon, down from 124.93 late Monday. One British pound cost $1.5095, more expensive than $1.5000 late Monday. Other late dollar rates in New York, compared to late Monday, included 1.61425 German marks, down from 1.6190, and 1.4635 Swiss francs, down from 1.4670.
Commodities
Lumber futures prices soared to a 13-year high Tuesday on the Chicago Mercantile Exchange amid reports of constricted supplies and rising home sales.
On other commodity markets, orange juice, oil, grain, livestock and precious metal futures all fell.
Spruce two-by-fours for January delivery surged 5 cents, the permitted daily limit, to $277.20 per 1,000 board feet. It was the highest settlement for near-term deliveries since August, 1979, when lumber futures hit a record high of $287.30.
Lumber futures have risen sharply in recent months, reflecting signs of a strengthening economy and sharply reduced logging on federal timberland in the Northwest because of efforts to protect the habitat of the threatened northern spotted owl.
January platinum sank $3.10 to $356 an ounce on the New York Mercantile Exchange. On New York’s Commodity Exchange, gold fell 40 cents to $332.50 an ounce. March silver fell 2.3 cents to $3.667 an ounce.
Market Roundup, D6
