Dow Dips 7.56 as Uncertainty Grows : Market Overview
Blue chip stocks ended with modest losses, while smaller issues were hit by selling amid growing uncertainty over how the Clinton Administration will cut the nation’s budget deficit.
* Thirty-year Treasury bond yields edged downward, with intermediate maturities gaining on hints that the Federal Reserve could lower interest rates and on better than expected demand at an auction of five-year notes.
Stocks
The Dow Jones industrial average, off about 20 points at its afternoon low, closed with a 7.56-point loss at 3,291.39.
Declining issues outnumbered those advancing by more than 3 to 2 on the New York Stock Exchange. Volume on the NYSE came to 277.50 million shares, down from 314.11 million.
Analysts said attention on the Street was focused on an appearance before a joint congressional economic committee by Chairman Alan Greenspan of the Federal Reserve Board.
Greenspan testified that sluggish job growth and weak real estate prices meant the economy was “not out of the woods” despite six months of improvement.
However, he also said business activity has been “increasing at a firmer pace of late,” and the outlook for the banking industry is much improved.
Among the market highlights:
* American Express fell 7/8 to 23, continuing its retreat since a boardroom battle for the top jobs at the company was resolved early this week.
* International Business Machines, which cut its dividend as expected Tuesday and said it was looking for a new chief executive, rose 5/8 to 49 5/8.
* McDonald’s lost 3/8 to 47 7/8. Fourth-quarter profit came in at 61 cents a share, against 54 cents a share in the same period a year earlier.
* Other losers among the blue chips included General Motors, down 1/4 at 38; Eastman Kodak, down 1/4 at 50 1/8; Exxon, down 3/4 at 60 1/2, and Boeing, down 7/8 at 34 5/8.
* Schlumberger fell 2 5/8 to 57 3/8. The company reported fourth-quarter earnings of 64 cents a share, down from $1.28 a share in the corresponding period of 1991.
* Bank stocks were mixed after Greenspan’s comments. Chemical Banking gained 1 1/2 to 41 3/4; J.P. Morgan added 1/8 to 60 1/8; Citicorp rose 3/4 to 26 3/8, and Chase Manhattan picked up 3/4 to 30 3/8. But BankAmerica dropped 1 to 52 1/2.
* Diebold rose 7/8 to 66 1/8. The company declared a 3-for-2 stock split and an increase in the cash dividend.
* Primerica, which also plans a 3-for-2 split and a higher cash payout, gained 1/4 to 53 1/4.
* Losers among technology issues traded in the NASDAQ market included Intel, down 1 3/4 at 112 5/8; Microsoft, down 1 3/4 at 86 1/4; Oracle Systems, down 1 7/8 at 33 1/4, and Sun Microsystems, down 3/4 at 38 1/2.
In overseas trading, share prices ended at their lows in Frankfurt, with the 30-share DAX average finishing at 1,562.32, off 13.84. London’s Financial Times 100-share average closed down 3.2 points at 2,832.5, and Tokyo’s Nikkei 225-share average finished up 17.05 points at 16,509.68.
Credit
The long bond’s yield dropped to 7.24% from Tuesday’s 7.25%, while its price, which moves in the opposite direction of its yield, rose 5/32 point, or $1.56 per $1,000 in face amount late Wednesday.
“We got buyers back into the market,” said William V. Sullivan, director of money market research at Dean Witter Reynolds Inc. That sparked “broad gains across the list, and the selling pressure that characterized Tuesday’s session was not present.” The catalyst, he said, was Greenspan’s mixed economic prognosis.
Short and intermediate securities posted gains after demand was unexpectedly strong at the Treasury Department’s auction of $11.5 billion in five-year notes, after a poor showing for two-year maturities at an auction Tuesday.
The federal funds rate, the interest on overnight loans between banks, was 2.875%, up from 2.813% late Tuesday.
Other Markets
The dollar rose in listless trading against all currencies but the Canadian dollar.
The dollar gained in Europe and continued to advance when trading shifted to U.S. markets.
In New York, the dollar closed at 124.10 Japanese yen, up from 123.55 yen on Tuesday. The greenback settled at 1.587 German marks, up from 1.577.
The British pound continued to get hammered after Tuesday’s surprise one-point cut in interest rates by the Bank of England. The pound closed at $1.511, less expensive than Tuesday’s $1.5380.
Meanwhile, crude oil futures edged higher on the New York Mercantile Exchange, with light, sweet crude gaining 2 cents to close at $19.66 a barrel.
Profit taking erased most of Tuesday’s gains in gold futures on New York’s Commodity Exchange. Gold finished down $1.20 to $329.90 an ounce, and March silver fell 2 cents to $3.682 an ounce.
Market Roundup, D6
