21-Point Loss Breaks Dow’s String : Market Overview
* Blue chip stocks fell after mixed economic data caused some investors to question the staying power of the economic recovery.
* Treasury bond yields continued to inch up in advance of today’s government report on wholesale inflation in February.
Stocks
Profit takers finally got control of the market, stalling the recent buying wave in blue chips that had sent many stocks to new highs.
The Dow index and the broader Standard & Poor’s 500 index were weighed down by selling of some key industrial issues. Those stocks had soared in Monday’s big rally.
The Dow closed down 21.34 points to 3,457.00, though winners and losers were about evenly matched on the New York Stock Exchange. Trading volume held steady at 257.06 million shares.
A Commerce Department report that retail sales rose a surprisingly strong 0.3% in February was overshadowed by the Labor Department’s weekly tally of unemployment claims.
The number of Americans filing first-time claims for jobless benefits jumped by 25,000 in late February. Many analysts had expected claims to drop by 6,000.
The Labor report reignited worries that recent signs of economic strength have been overblown.
With stock prices at, or near, records, “people tend to worry” over every economic number, said John Luvin, a trader at BHF Securities. “They’ll do what they need to protect themselves.”
Smaller stocks, however, fared much better than blue chips, which could be a signal that the recent selloff in small stocks has run its course. The NASDAQ composite index added 1.41 points to 694.28.
Among the market highlights:
* Economy-sensitive industrial stocks losing ground included IBM, off 1 to 54 7/8; Cummins Engine, off 1 7/8 to 90 3/4; Dow Chemical, off 1 1/8 to 56, and Reynolds Metals, which fell 1 3/8 to 51.
* Paper and lumber stocks, another cyclical sector, were pushed sharply lower after Merrill Lynch lowered its intermediate-term rating on some of the stocks to neutral from above average. Louisiana Pacific plunged 4 5/8 to 70 7/8, Georgia Pacific slid 2 3/8 to 64 5/8, and International Paper fell 1 3/4 to 64 5/8.
* Auto issues also had a bad day. GM slumped 1 3/8 to 38 3/4 after its top cost-cutter resigned to pursue other interests. Ford fell 1 to 49, and Chrysler dropped 1 1/8 to 39.
* Drug stocks couldn’t sustain their Wednesday rally. Bristol-Myers lost 1 to 57 1/2, Warner-Lambert dropped 1 3/8 to 68 3/8, Merck slipped 3/4 to 39 1/4, and Alza eased 1 1/2 to 33 5/8.
* On the plus side, National Semiconductor jumped 1 3/8 to 12 7/8 after reporting sharply higher quarterly earnings and projecting good results in the current quarter.
Other computer chip stocks rose as well, including Texas Instruments, up 1 1/8 to 60 5/8, and Motorola, up 3/4 to 64. However, industry leader Intel slipped 1/4 to 116 7/8.
Elsewhere among tech issues, Sun Microsystems dove 2 5/8 to 32 1/4. Two analysts warned clients that Sun may report disappointing first-quarter earnings because of tough competition in the computer workstation market.
* Casino stocks turned hot again. Promus surged 3 7/8 to 68, Circus Circus added 1 to 46 1/4, MGM Grand gained 3/4 to 24 5/8, and Mirage jumped 1 5/8 to 39 7/8.
Overseas, London’s Financial Times 100-share average closed off 3.3 points to 2,953.4, while Frankfurt’s DAX average added 7.72 points to 1,717.40.
Tokyo stocks finished stronger, with the Nikkei index rising for the fifth consecutive day. It added 46.16 points to 17,904.79.
Credit
Bonds suffered marginal selling for a fourth straight day, as traders prepared for today’s government report on wholesale inflation in February.
The yield on 30-year Treasury bonds closed at 6.76%, up from Wednesday’s 6.74%. Yields also inched up on shorter-term issues.
Though the jobless-claims report on Thursday suggested a still-iffy economy, investors were not inclined to bet on a continuation of the steep decline in interest rates this year.
Today’s report on wholesale inflation will be critical for the market, many traders said: If the inflation report is stronger than expected, it could boost expectations that the bond rally is over.
“At this point, people . . . are beginning to question if we can justify the (yield) levels that we’re at,” said Elliott Platt, research director at Donaldson, Lufkin & Jenrette Securities Corp.
The federal funds rate, the interest on overnight loans between banks, was 3% at closing, up from 2.938% late Wednesday.
Other Markets
The dollar was mixed in trading against the major currencies as rumors abounded about whether Boris N. Yeltsin would survive as president of Russia.
The dollar started rising late Wednesday and continued in Thursday trading in Tokyo as rumors about Yeltsin’s future piled on. The U.S. currency often gains in times of international turmoil as traders seek a safe haven.
But the early dollar-buying faded later, as Yeltsin’s hold on power appeared fairly solid.
The dollar closed in New York at 117.65 Japanese yen, down from 118.05 on Wednesday. It also eased to 1.662 German marks from 1.667.
Commodity markets also were riled by the Yeltsin rumors. Russia is the world’s biggest palladium producer and is second only to South Africa in platinum output.
April platinum futures on the New York Merc rose $3.70 to $349.30 an ounce. June palladium futures gained $2.30 to $105.
Also, Chicago grain prices ended mostly lower amid nervousness that Russia’s political struggles could short circuit credits to Russia to buy food.
Elsewhere, near-term gold rose 80 cents to $327.10 an ounce on the New York Comex. Silver surged 5.7 cents to $3.62.
In energy markets, crude oil prices continued their fall on a correction to last Thursday’s rally, when crude scaled a four-month peak but was unable to sustain such heights. Worries abound that oil supplies will soon overwhelm demand.
Light, sweet crude oil for April fell 26 cents on the New York Merc to $20.13 a barrel.
