FINANCIAL MARKETS : Dow Slips 3.5 Despite Upbeat News : Market Overview
Stocks closed mixed as investors weighed the latest upbeat reports on the economy.
Bond yields rose as traders braced for disappointing news in the Treasury’s quarterly borrowing announcement, expected today.
Stocks
The market was ripe for a weak opening after U.S. stocks lost ground overnight in European trading. Prices seesawed in a narrow band for most of the session.
The Dow Jones industrials ended with a small loss of 3.51 points to 3,328.67. But advancing issues still outnumbered decliners 5 to 4 on the New York Stock Exchange, where volume was active at 271.56 million shares.
On the NASDAQ market, the composite index added 3.34 points to 705.11.
On the Big Board, another widespread selloff in drug stocks tempered the advance in blue chips. Five of the 10 most active NYSE stocks were drug issues.
A pair of favorable economic reports did little to entice investors. The government reported that its index of leading indicators jumped a better than expected 1.9% in December, while sales of new homes shot up 6.3% in the same month for the best showing in three months.
“There’s a lot of positive information on the economy,” said James Schroeder, an analyst at MMS International in Chicago.
“But people want to see if it translates into jobs,” he said, noting that traders are anxiously awaiting the January unemployment report, due out Friday.
Several analysts said the market was due for a breather after the Dow’s climb of nearly 40 points in the last four sessions. Traders were selectively taking profits, but mutual fund managers continued to look for points of entry into the market as money continues to flow into funds at record levels.
Among the market highlights:
- Drug stocks were again slammed as a Salomon Bros. downgrade of the group refocused worries about the impact of the Clinton Administration’s health care reforms on the profits of drug firms.
Among major drugs, Merck lost 1 1/8 to 37 3/4, Glaxo sank 1 1/8 to 18 1/2, Bristol-Myers dropped 1 3/8 to 58 1/8, Amgen fell 1 to 59, Abbott Labs lost 1 3/8 to 26 1/8, Schering Plough was down 1 1/2 to 58 5/8, and Pfizer tumbled 2 7/8 to 63 1/8.
- Shares in cellular telephone firms gained on new reports minimizing the possible health risks said to be linked to them. The stocks had been hammered last week on cancer concerns.
Motorola was up 1/2 at 54 1/4, McCaw Cellular rose 1 7/8 to 35 1/4, LIN Broadcasting jumped 2 1/8 to 82 3/4, and Comcast added 5/8 to 21 1/8.
- Wells Fargo eased 1/2 to 95 7/8. But late in the day it was reported that investor Walter Annenberg, an ally of Warren Buffett, had raised his stake in Wells to 6.5% from 5.3%. The additional shares were purchased by Annenberg between Jan. 15 and Jan. 25.
- Restaurant stocks, high flyers last year, resumed their rise. Lone Star Steakhouse jumped 3 3/8 to 41 3/4 after announcing faster expansion plans. Also, Sonic rose 1 1/4 to 27, Fresh Choice gained 1 1/4 to 29 1/2, Au Bon Pain jumped 2 to 25 3/4, and McDonald’s rose 1 to 50 1/4.
- Chrysler closed unchanged at 38 3/4. The company priced its offering of 46 million new shares at that closing level, raising $1.78 billion.
- Among Southland issues, Tokos Medical gained 2 1/2 to 16. The firm said the American Medical Assn. decided it won’t investigate Tokos’ physician contracts. The Santa Ana-based company, which provides home infusion and remote monitoring services for women at risk for premature or problem births, has been hit by controversy over its services’ effectiveness.
Overseas, London’s Financial Times 100-share average closed 17.2 points lower at 2,834.4, while Frankfurt’s DAX average finished at 1,583.09, a fall of 2.07 points.
In Tokyo, the Nikkei average advanced 52.67 points to 17,186.31.
In Mexico City, the Bolsa index suffered another big hit, falling 40.17 points, or 2.4%, to 1,624.15 on fears that the nation’s rising trade deficit will force short-term interest rates higher.
Credit
The rise in bond yields was partly a reaction to overnight activity in Tokyo, where traders sold fixed-income securities after the Bank of Japan failed to ease interest rates.
In U.S. trading, the yield on the Treasury’s 30-year bond rose to 7.24% from 7.20% Monday. Shorter-term yields also were higher.
Many traders in recent weeks have expected the Treasury to announce today that it would issue fewer long-term bonds during its quarterly auctions, which finance the federal deficit.
Long-term bond yields have fallen on these expectations because reduced supply would make existing securities worth more, in theory.
However, in recent days bonds have been hurt by signals that the Treasury won’t cut back as much as expected.
Other Markets
The dollar was mixed against major currencies, though the trend was mostly higher as the economic outlook strengthened in the United States and continued to show weakness in Europe.
In late trading in New York, the dollar was at 124.65 Japanese yen, down from 125.05 yen Monday. But it rose to 1.642 German marks, up from 1.637 marks Monday.
The dollar also strengthened to $1.444 per British pound from Monday’s $1.460.
At the New York Mercantile Exchange, light, sweet crude oil for delivery in March settled at $20 a barrel, down 31 cents.
Meanwhile, gold rose 10 cents to $330.40 an ounce on New York’s Commodity Exchange. Silver slipped 0.3 cent to $3.672 an ounce.
Market Roundup, D6
