Word Is Caution as Dow Rises 3.79 : Market Overview : Highlights of Monday’s market activity
* The stock market finished mixed in relatively quiet trading, as many players were absent for the observance of Martin Luther King Day. The Treasury bond market was closed for the holiday.
* The dollar fell against key currencies as doubts rose about hoped-for cuts in interest rates in key European nations. But trading was very thin.
Stocks
Trading was restrained by the holiday, and analysts said those investors present seemed inclined to wait for developments in the new hostilities between the United States and Iraq.
Many Wall Streeters were also awaiting comments and commitments from President-elect Bill Clinton as he takes office Wednesday.
The Dow Jones industrials added 3.79 points to 3,274.91. Advancing issues slightly outnumbered losers on the New York Stock Exchange, on volume of 204.07 million shares.
Meanwhile, the NASDAQ market of mostly smaller stocks hit another new high, gaining 0.98 of a point to 698.13, its fourth consecutive record close. The NASDAQ advance came despite a broad decline in biotech stocks.
Michael Metz, strategist at Oppenheimer & Co., noted a shift Monday by investors toward “big-name laggards” especially in the industrial area. Optimism about a stronger economy under Clinton has boosted expectations for profit growth at many industrial firms.
Despite the renewed Iraq-U.S. conflict, many traders said the hostilities wouldn’t become a major market factor unless a ground war erupted or Iraq attacked Israel.
Among the market highlights:
* Industrial gainers included Allied-Signal, up 1 5/8 to 59 1/2; Chrysler, up 1 1/8 to 37 1/2; Dupont, up 7/8 to 47; W. R. Grace, up 1 1/8 to 39 1/4; Laclede Steel, up 3 to 19 1/2, and Scott Paper, which rose 7/8 to 35 3/8.
Troubled IBM also advanced, rising 1 1/4 to 49 1/2. It will report fourth-quarter earnings today.
* Bank stocks staged another powerful advance on reports that BankAmerica Corp. plans to sell as much as $2 billion in bad real estate loans and properties to an investor’s group. The group’s interest suggested to some analysts that banks’ problem-loan situation in real estate is bottoming.
B of A jumped 2 1/8 to 49 1/2, and the news helped boost other California bank stocks. In particular: First Interstate leaped 1 1/8 to 49 7/8, Imperial Bancorp soared 2 to 12 7/8, Union Bank gained 1 3/4 to 30 1/2, and Ventura County National added 1 to 5 1/4.
Among other major banks, Chase Manhattan rose 1 1/8 to 30 1/2, Bank of New York jumped 2 3/4 to 59 1/2, and Mellon Bank gained 1 3/4 to 56 5/8.
* Biotech stocks and drug stocks were sharply lower after biotech firm Centocor said it is suspending its drug Centoxin from sales in Europe and clinical testing in this country. The firm said some patients died after receiving the treatment, which is meant to fight serious infections.
Centocor collapsed 11 1/8 to 6 5/8. Other biotech losers included Biogen, off 1 3/8 to 41 7/8; Amgen, down 2 3/8 to 67 5/8; Immunex, down 1 3/4 to 47 3/8; Genzyme, off 1 3/4 to 41 1/4, and Synergen, which fell 1 3/4 to 59 1/2.
Among major drug firms--many of which have made substantial investments in biotech firms--Pfizer slumped 2 1/8 to 63 1/4, Bristol-Myers lost 1 3/8 to 62 1/2, Lilly sank 1 1/2 to 59 7/8, Merck eased 3/8 to 41 3/8, and Upjohn lost 3/4 to 29 1/2.
* Technology stocks, recent market leaders, were mixed. Apple eased 3/4 to 59 1/2, Sun Microsystems slid 1 to 36 7/8, and Oracle eased 1 1/4 to 28 1/2, but Intel shot up 4 7/8 to 116 5/8, extending its run.
* Xerox tumbled 3 5/8 to 83 after trading at a new 52-week peak of 87 1/2, as investors showed a confused response to the firm’s long-awaited announcement that it will quit its remaining insurance and other financial services businesses.
* Among Southland issues, Neutrogena lost 1 3/8 to 22 1/4. Late in the day, the skin-care products firm said earnings in the current quarter “will likely be somewhat negatively impacted” by lower sales of one major product in Europe. However, it said full-year 1993 earnings should be higher than in 1992.
Overseas, Frankfurt’s DAX index closed at its highest level since December, rising 28.58 points to 1,573.13, as buyers appeared confident of German interest-rate cuts despite currency-market rumors to the contrary.
In London, the Financial Times 100-share average closed two points lower at 2,763.1.
In Tokyo, the Nikkei average rose 101.64 points to 16,617.24.
Currency
The dollar was buffeted by new concerns that European interest rates may not drop anytime soon--and that U.S. rates may go lower. Trading was extremely thin.
Bob Ortiz, currency trader at Continental Bank in Chicago, noted that “there were comments overnight in Europe (by German central bank officials) stating that Germany was not going to ease its rates because they were still concerned with inflation.”
Then in Britain, that nation’s finance chief said his government also remained worried about inflation--implying that no further interest-rate cuts are likely there anytime soon.
The reports strengthened other currencies at the dollar’s expense, because higher interest rates overseas are bullish for those nations’ currencies.
By the close in New York, it took $1.55 to buy one British pound, up from $1.53 Friday.
The dollar also fell to 125.55 Japanese yen and 1.615 German marks, down from 126.10 yen and 1.626 marks Friday.
Commodities
Frozen pork bellies futures sank to contract lows on the Chicago Mercantile Exchange amid lower prices on the cash market. Meat and livestock futures also slipped.
February frozen pork bellies fell 1.83 cents to 35.67 a pound.
Pork belly traders reacted to figures that put fresh hog slaughters at record numbers for this time of year, said Charles Leavitt, an analyst with Shearson Lehman Bros. in Chicago.
Meanwhile, on the New York Mercantile Exchange, crude oil prices ended unchanged at $18.87 a barrel, erasing a 16-cent gain during the session tied to renewed attacks on targets in Iraq by U.S. and other Western forces.
“People here don’t think that Iraq will continue to support this market, and you can see that by the way it sold off, even while the Iraqi situation remains volatile,” said Tom Bentz, director of energy trading at Quantum Financial Services in New York.
Gold climbed out of the doldrums on New York’s Commodity Exchange, rising $1 to $328 an ounce, while March silver rose 1.50 cents to $3.68 an ounce.
Credit
Treasury bond prices ended mixed with little fluctuation in European trading Monday. U.S. trading of bonds will resume today.
In London, at the close of trading, the yield on the Treasury’s benchmark 30-year bond was unchanged at 7.35% and its price was down 1/32 point, or about 30 cents for each $1,000 in face amount.
Traders said the lack of significant economic statistics this week and the inauguration of President-elect Clinton on Wednesday gave investors good reasons to stay away from the market.
