Dow Drops 17 Amid Jitters Over U.S., Iraq : Market Overview
* Wall Street closed lower again, unable to shake jitters of a potential conflict between the United States and Iraq this weekend if the Arab nation does not withdraw its antiaircraft missiles from the Western allies’ no-fly zone.
* Bond market interest rates moved higher once again after unexpectedly weak employment statistics raised fears of an aggressive economic stimulation package. The Treasury’s main 30-year yield rose to 7.47% from Thursday’s 7.44%.
Stocks
Stocks remained pressured by the weak bond market, which sold off Thursday on weekly jobless claims data and also fell Friday as a smaller than expected rise in December non-farm payrolls re-sparked fears that the Clinton Administration may introduce a fiscal stimulus package.
The news sent the Dow Jones average down 17.29 points to 3,251.67, extending its loss for the week to 49.44 points.
Declining issues outnumbered advances by about 5 to 3 on the New York Stock Exchange. Big Board volume continued to set an active pace, with 263.47 million shares changing hands against 304.85 million in the previous session.
Analysts said a Friday night deadline for Iraq to withdraw its missiles was a big factor in the minds of investors, leading some to buy gold shares.
“Everyone expects Saddam to pull back missiles. But if he doesn’t, the question becomes ‘(Does the U.S.) go in without a U.N. mandate and do something about it?,’ ” MKI Securities Vice President Dick Stein said.
Added Dain Bosworth’s Brett Discher: “No one wanted to be caught short ahead of the weekend.”
The Labor Department reported that December non-farm payrolls rose by 64,000 against expectations for a 79,000 increase. The slowly recovering economy has added 600,000 jobs outside the farm sector since January.
“We can say that the trend in recent months has been one of slow improvement,” said William Barron, deputy commissioner of the Bureau of Labor Statistics, in testimony for Congress.
Analysts said the market’s fall also stemmed from profit taking. “This particular pullback is nothing more than a pause in an ongoing advance,” said Joseph Barthel of Fahnestock & Co.
On the NASDAQ bargain hunters steadied stocks, but the index closed down 1 point to 677.21.
“The dogs of the over-the-counter (stocks) have been the biotechs, and today they are pretty strong,” said Brian Finnerty at Unterberg Harris.
Among the market highlights:
* Amgen was up 1 3/4 to 69 1/2. Chiron Corp. was up 3 3/8 to 57 3/8, and Biogen was up 4 to 43 1/4.
* Gold shares that gained included ASA Ltd., up 1/4 to 31 3/8, and Homestake Mining, up 1/8 to 10 5/8.
* Woolworth fell 1 3/8 to 28 7/8 after it reported a small rise of 1% in its December sales. C. J. Lawrence cut its earnings estimates on Woolworth for this year and next. Wal-Mart fell 3/4 to 59 3/8 after it released December sales, which were as expected.
* Telefonos de Mexico lost 1 at 57 as foreign investor interest fizzled after three straight days of gains.
* Snapple fell 2 to 33 1/2 on profit taking, traders said.
In overseas trading, Tokyo’s 225-share Nikkei average dropped 146.20 points to 16,634.69. On the London stock exchange, the Financial Times 100-share average lost 17.3 points to close at 2,799.2, down 47.3 from its year-end finish on December 31. Frankfurt’s 30-share DAX average lost 10.98 points to end the week at 1,531.52.
Credit
Long-term securities fell early in the session after the Labor Department released the nation’s monthly unemployment report.
The weak employment report caused traders to drive the price of the 30-year bond down 3/8 point, or $3.75 per $1,000 in face amount because traders feared that it would encourage President-elect Bill Clinton to push an aggressive economic stimulation package that would accelerate deficit spending.
Bond prices and yields move in opposite directions.
A quick heat-up of the economy could prove inflationary, which concerns bond investors since it would lessen the value of their long-term holdings.
But the unemployment statistics boosted the prices of short- and medium-term securities because they lessened the likelihood that the Federal Reserve will find it necessary to raise short-term interest rates to slow down growth.
“The employment number was such that they don’t fear the Fed was going to tighten on them soon,” said Donald Fine, chief market analyst at Chase Securities Inc.
The federal funds rate, the interest on overnight loans between banks, was 2.813%, down from 3.188% late Thursday.
Currency
The dollar closed mostly higher Friday in busy trading on currency markets as political instability heated up around the world.
The greenback advanced overnight in Europe, setting the stage for a strong opening when trading shifted to domestic markets. Analysts said the dollar was in demand once again as a “safe-haven” currency in times of world turmoil.
“There are not a lot of reasons to sell the dollar,” said Frank Pusateri, a vice president at the Bank of Boston.
The dollar sold off briefly after release of the December unemployment report.
Currency traders focused on the 64,000 monthly gain in jobs, most of which were in the service industries. That was well below analysts’ expectations of gains ranging from 100,000 to 120,000 jobs, Pusateri said.
Still, he noted that most other economies around the world are perceived to be “in worse shape than we are,” and the dollar recovered to close at the highs for the session.
In New York, the dollar closed to 125.35 Japanese yen and 1.647 German marks, up from Thursday’s 125.15 yen and 1.637 marks. The British pound rose to $1.532 from $1.531 late Thursday.
Commodities
A record-shattering rally in lumber futures prices continued as sawmills--hampered by frigid, stormy weather--rationed the amount of wood for sale.
Spruce two-by-fours for January delivery soared $7.60 to a record $308 per 1,000 board feet on the Chicago Mercantile Exchange. It was the third record-breaking day for lumber futures since the market smashed the August, 1979, high $287.30 on Monday.
Gold prices also settled mostly higher. On the New York Commodity Exchange, gold for current delivery settled at $329.20 an ounce, up 50 cents from Thursday. Silver rose 1.4 cents to $3.678 an ounce.
Energy futures ended mixed on the New York Mercantile Exchange as traders tracked developments in the U.S.-Iraq confrontation, with light, sweet crude oil for February delivery sinking 7 cents to $18.88 a barrel.
Dow Jones Industrials
New York Volume, Los Angeles Times
Markets at a Glance
