Blue Chips Rise as Other Indexes Lag : Market Overview
A handful of winners among blue chip stocks propelled the Dow Jones industrial average higher, but broader market measures lagged on downbeat earnings expectations. The Dow rose 11.61 points to 3,455.64.
* Treasury prices rose after the Federal Reserve dipped into the market and bought about $4 billion of long-term Treasury bonds. It bought the securities from banks to lift banking reserves.
Stocks
The Dow industrials have gained more than 102 points since the start of a rally last Wednesday. But the Standard & Poor’s composite index and New York Stock Exchange index posted losses, while the NASDAQ index was nearly flat.
“This is a blue chip rally we’re having here,” said Thom Brown, managing director at Rutherford, Brown & Catherwood, pointing to gains in General Electric Co., General Motors Corp. and Minnesota Mining & Manufacturing, among others. GE rose 1 1/4 to 94 3/4, GM was up 1 to 40 5/8, and 3-M was up 2 5/8 to 113 3/8.
In the broad market, advances led declines 7 to 6 on New York Stock Exchange volume of 257.3 million shares, down from 286.7 million in the previous session.
The NASDAQ index--up 0.11 to 673.94--was weighed down by big losses in the shares of Networth Inc. and State Street Boston Corp. Both companies were hurt by concerns over earnings. Networth sank 8 to 10 3/4 after the software company said it sees a loss of 11 cents a share in the third quarter. State Street slid 7 5/8 to 35 1/8 amid expectations that higher costs will crimp the earnings growth of the leading servicer of financial assets.
A drop of 1 3/4 to 27 1/4 in the shares of Wal-Mart on speculation of weak sales also depressed broader averages.
“It looks like they decided to take the retailers and shoot them,” said Bill Raftery, a technical analyst at Smith Barney.
Besides the discount retailer, Home Depot fell 1 5/8 to 43, May Department Stores tumbled 2 3/8 to 75 3/4, and Winn-Dixie Stores was down 2 to 57.
In other trading highlights:
* Digital Equipment Corp. reported a $30-million third-quarter loss, but President and Chief Executive Robert B. Palmer said the results have been improving. The stock rose 1 1/2 to 41 5/8.
* B. F. Goodrich fell 1 1/8 to 46 7/8 after reporting that its first-quarter loss had widened to 38 cents a share from 16 cents. Analysts had expected net earnings of 4 cents.
* NovaCare plunged 3 3/8 to 12. The speech and physical therapy company said Tuesday that its third-quarter earnings will fall below market expectations. It blamed costs associated with restructuring some businesses.
* Waste Management rose 1 5/8 to 33 1/2 after the company said Tuesday that its first-quarter earnings would meet analysts’ target of 40 to 41 cents a share.
* The stocks of diaper makers fell after Procter & Gamble said Tuesday it will cut the price of its Pampers and Luvs brands, sparking talk of a diaper price war. Procter & Gamble rose 1/8 to 48 1/4. But Kimberly-Clark fell 1 7/8 to 51 1/2. Paragon Trade Brands, which makes private-label diapers, slid 5 to 25 1/4.
* Among actively traded NYSE issues, RJR Nabisco fell 1/4 to 5 3/4. On Tuesday, the company slashed the total dividend it will pay to investors after it issues separate food and tobacco stocks. Citing an impending cigarette price war, RJR also said it will delay any dividend on the tobacco equity.
In overseas trading, London’s Financial Times-100 stock index closed 4.7 points lower at 2,842.1.
In Frankfurt, the 30-share DAX index finished 1.39 points higher at 1,672.44.
In Tokyo, stocks tumbled as profits were taken from Tuesday’s surge. The 225-share Nikkei stock average finished 206.91 points, or 1%, lower at 20,533.38.
Credit
The Federal Reserve gave a much-awaited nudge to the Treasury market by announcing that it will purchase a wide range of government securities this week to help boost banking system reserves.
The government’s 30-year bond advanced moderately as its yield flirted with the recent rally’s low, reached early last month. The Fed’s purchase, announced shortly after midday, was estimated at between $3.5 billion and $4 billion.
The market gains extended a recent advance that has been propelled by expectations of low inflation and modest growth. The long-bond’s yield bottomed out at 6.72% on March 8.
On Wednesday, the 30-year bond’s yield eased to 6.75% from 6.78% late Tuesday. Its price, which moves inversely from yield, rose 7/16 point, or $4.38 per $1,000 in face value.
The Fed periodically enters the market to help regulate banking system reserves and as a way to influence interest rates. But many participants had expected the Fed to announce the purchase on Tuesday.
The federal funds rate, the interest on overnight loans between banks, was 3.25%, up from 2.81% late Tuesday.
Currency
The dollar advanced across the board Wednesday in moderate trading that was driven mostly by technical factors.
The dollar inched higher around the globe as finance ministers from the world’s seven leading industrialized nations began a two-day meeting in Tokyo.
The meeting of the Group of Seven served “as a background deterrent to selling the dollar,” particularly against the Japanese yen, said Randolph Donney, research director at Pegasus Econometric Group in Hoboken, N.J.
In New York, the dollar settled at 113.88 yen, up from 113.40 yen on Tuesday. It cost $1.5515 to buy one British pound, less expensive than Tuesday’s $1.5580.
Commodities
Platinum led precious metal futures prices sharply higher as South African strife sparked fears of supply disruptions.
A proposed increase in Western aid to Russia may also have triggered buying amid perceptions that Russia would need to sell less of its precious metal stocks to gain hard currency.
On other commodity markets, grains and soybeans weakened; livestock and meat futures ended mostly higher, and energy futures were mixed.
Platinum for July delivery surged $6.90 to $369.30 an ounce on the New York Mercantile Exchange. The more thinly traded April contract rose $4.90 to $375.30 an ounce.
On New York’s Commodity Exchange, April gold rose $2 to $339.70 an ounce; May silver climbed 6.8 cents to $3.945 an ounce.
The rally was led by platinum as millions of workers in South Africa went on strike to protest the slaying of black leader Chris Hani. Four people were killed and hundreds wounded as blacks battled police.
Light, sweet crude oil for May delivery fell 6 cents on the New York Mercantile Exchange to $20.40 a barrel.
Market Roundup, D6
