MARKETS: Growth Stocks Lead Dow Lower : Dow Off 1.35; Growth Issues Slide : Market Overview
* Stocks closed mixed, as drug, food and other classic growth issues suffered steep declines, while many industrial and technology stocks rose sharply.
* Treasury bond yields seesawed in thin trading, while gold and silver stabilized after Monday’s big declines.
Stocks
Prices opened on a weak note, then stayed in positive territory for much of the session before a late selloff hit.
The Dow Jones industrial average ended down just 1.35 points at 3,307.87, while smaller stocks recovered from Monday’s drop. The NASDAQ composite index of small issues gained 2.54 points to 674.34.
Stock winners and losers were basically even in number on the NASDAQ market, though winners held an 11 to 8 edge over losers on the New York Stock Exchange. Big Board volume rose to 241 million shares from Monday’s 201 million.
The market’s surface calm masked a deep selloff of drug, food and other classic growth stocks, while industrial and technology issues continued their 1992 surge on expectations of a stronger economy in 1993.
Semiconductor stocks in particular saw heavy buying. Analysts say there is great optimism about the computer industry, coming off stellar fourth-quarter growth for many companies, especially makers of personal computers.
Also, the annual Consumer Electronics Industry trade show begins in Las Vegas on Thursday. It is a major showcase for high-tech.
Meanwhile, drug stocks--long accustomed to being market leaders until last year--continued to be hammered amid heightened concern that President-elect Bill Clinton might impose price controls or other regulations on drugs to restrain health care spending.
Michael Metz, analyst at brokerage Oppenheimer & Co., said another trend remains apparent on Wall Street: “Companies involved in domestic markets are doing very well,” while investors are turning away from multinational companies (including the drug giants) because of the weakening economies of Japan and Europe.
Among the market highlights:
* The high-tech surge was led by semiconductor stocks Intel, up 4 1/2 to 91; Motorola, up 2 3/8 to 105 3/4; Texas Instruments, up 3 1/8 to 49 1/8, and Advanced Micro Devices, up 1 3/8 to 19.
Other tech gainers included Sun Microsystems, up 2 3/4 to 36 3/8; Hewlett-Packard, up 1 7/8 to 70, and Cisco Systems, up 2 1/8 to 80 1/8.
But beleaguered IBM slumped to a new 11-year low of 48 1/2 during trading, and closed at 48 7/8, down 1 1/4. Traders said some money managers continue to cash in IBM shares to buy other tech stocks.
Another tech loser was Varian Associates, which slumped 4 1/8 to 38 3/4 after the maker of electron tubes and other devices said its recent quarter’s earnings will be below year-ago results.
* Among industrial issues, auto makers gained on news that Clinton will host an “auto summit” with Detroit’s Big Three leaders today to discuss trade, the economy and the need for fewer regulations, traders said.
Ford Motor rose 5/8 to 44 5/8, General Motors was up 3/8 to 33 1/4, and Chrysler gained 1/2 to 33 1/8.
Other leading industrials included GE, up 1 to 86 1/2; railroad CSX, up 2 to 70 1/4; PPG Industries, up 3/4 to 66 1/4, and Reynolds Metals, up 1 3/8 to 56 3/8. Also, Xerox, which rose 3 1/8 Monday, added another 1 3/4 to 84 1/8 on rumors that its Crum & Forster financial services unit will be restructured.
* Among Southland industrials, Magnetek surged 1 3/4 to 19 1/8. The company said it received an “unusually heavy” volume of $200 million in orders in December for its energy-saving lighting ballasts.
Another Southland industrial, BWIP, slumped 1 1/8 to 27 5/8. The maker of fluid control systems was removed from brokerage Goldman, Sachs’ recommended list because the share price has run up recently.
* The day’s big losers were drug and biotech stocks. Leading losers included Schering-Plough, down 2 3/4 to 60 7/8; Pfizer, down 2 1/2 to 69 7/8; Warner-Lambert, off 1 3/8 to 67 1/8; Amgen, which fell 2 7/8 to 67 3/4, and Alza, off 1 3/8 to 45.
Medimunne, a biotech issue, slumped 4 to 19 1/4 on rumors of disappointing findings in tests involving a possible AIDS antibody the company is working on.
* Food and tobacco stocks also weakened. Philip Morris lost 2 7/8 to 73 1/2 on news that New York state is weighing of new cigarette excise taxes. Cigarette rival Loews also fell, losing 2 to 117 7/8.
Among food issues, Coca-Cola eased 7/8 to 41 1/8, Sara Lee lost 5/8 to 28 5/8, and CPC sank 7/8 to 49.
* Among media stocks, News Corp. fell 2 1/2 to 37 7/8 on news that the president of its Fox Broadcasting unit stepped down to pursue other interests.
Overseas, the London stock exchange closed sharply lower in profit taking, with the Financial Times 100-share average falling 27.9 points to 2,833.6.
In Frankfurt, the DAX average shot up 25.09 points to 1,556.42 on renewed speculation about interest-rate cuts.
In Tokyo, the Nikkei average fell 151.50 points to 16,842.58.
In Mexico City, the Bolsa index rocketed 40.48 points, or 2.3%, to 1,817.16, the highest level since last June, as foreign investors bought heavily.
Credit
Profit taking hit bonds after Monday’s big rally.
The yield on the Treasury’s 30-year bond rose marginally to 7.33%. On Monday, the bond’s yield fell from 7.39% to 7.32%, its lowest level in about three months.
Investors have become exceedingly optimistic in recent months that Clinton will be successful in reining in the federal deficit. Also, continued low inflation has boosted demand for high-yielding long-term bonds.
“The market tone is very constructive and ended up little changed” Tuesday, said Astrid Adolfson, economist at McCarthy, Crisanti & Maffei Inc. in New York. But she said volume remained relatively light, which showed that the biggest investors, such as pension funds and mutual funds, remained sidelined.
The federal funds rate, the interest on overnight loans between banks, was 3%, down from 3.25% late Monday.
Other Markets
The dollar gave ground after Monday’s surge, in trading that focused on the British pound.
Eager buyers bought the pound on the assumption that possible monetary troubles looming in Europe this year would benefit the British currency at the expense of the German mark.
In New York, it took $1.550 to buy one British pound late Tuesday, up from $1.50 Monday.
The dollar also weakened to 1.626 marks from 1.640 Monday, and to 124.85 Japanese yen, down from 125.30.
Elsewhere, precious metal futures recovered on New York’s Comex after gold plunged to a seven-year low on Monday. The dollar’s weakening helped spur gold buying.
February gold rose 60 cents to $328.70 an ounce, and March silver rose 3.7 cents to $3.69 an ounce.
Energy futures rallied on the New York Mercantile Exchange, with light, sweet crude oil for February delivery rising 22 cents to $19.26 a barrel after falling sharply on Monday.
Dow Jones Industrials
Markets at a Glance
New York Volume
