FINANCIAL MARKETS : Dow Drops 23.50 Amid Profit Taking : Market Overview
* Stocks closed broadly lower for a second straight session as investors again cashed out of many stocks that led the first-quarter market advance.
* Interest rates gyrated, as short-term yields fell while long-term yields inched higher.
* The dollar tumbled to yet another postwar low against the Japanese yen. Early today in Tokyo the dollar fell below 110 yen.
Stocks
The market was dominated by sellers the entire session, and at one point the Dow industrials were off as much as 46 points before rallying back. The Dow closed at 3,443.49, down 23.50 points.
On the New York Stock Exchange, losers swamped winners by 12 to 7, and volume surged to 317.99 million shares from Monday’s 244.71 million.
Analysts said profit takers continued to hit many of the stock groups that were strongest in the first quarter, including banking, airline, auto and utility issues.
“This is just a consolidation of the run-up. Some large-cap stocks are under pressure,” said Richard Meyer, manager of institutional trading at Ladenburg Thalmann.
But experts were troubled by investors’ reluctance to hold stocks of firms posting strong first-quarter earnings, including many banks.
And because smaller stocks, such as those on the NASDAQ market, have been falling even as the Dow has hit new highs recently, analysts caution that the broad market may be setting itself up for a deeper selloff.
Among Tuesday’s highlights:
* Bank stocks leading the market lower included Nationsbank, off 2 3/8 to 52 3/8; Mellon, down 1 7/8 to 59 3/4; Society, off 1 1/2 to 33 3/4, and First Union, which lost 1 1/4 to 48 5/8.
Among California banks and S&Ls;, First Interstate tumbled 2 1/4 to 57 1/2 despite a strong profit report and dividend hike. Also, Wells Fargo sank 5 1/2 to 113 7/8 despite beating analysts’ earnings expectations. Coast Savings lost 7/8 to 14 1/8 even though quarterly operating profit rose 39%.
* Auto stocks were weak for a second day. Chrysler reported healthy earnings Monday, but many analysts fear the results won’t be repeated this year. Chrysler lost 1 3/4 to 40 1/4, Ford fell 1 to 53 1/4 and GM slipped 1/2 to 39 1/8.
* Airline issues also continued to sink on fare war worries. Southwest plunged 2 to 39, American Airlines’ parent AMR dropped 1 3/8 to 65 1/4 and Alaska Air slid 1/2 to 16.
* On the plus side, some investors barreled into drug stocks for a second day, apparently enthused that first-quarter earnings reports for some key firms weren’t below already-depressed expectations.
Pfizer, which reported a gain in operating earnings of 29%, leaped 3 1/4 to 65 1/8. The report was hailed by analysts as perhaps the most impressive among beleaguered drug companies this quarter. Other gainers included Merck, up 1 5/8 to 37 1/2; Bristol-Myers, up 1 3/8 to 62, and Amgen, up 1 7/8 to 41.
* Other consumer stock groups failed to catch fire with the drugs. Retailers were particularly weak. May Department Stores sank 2 to 70 1/4, Dayton-Hudson lost 1 to 74 and Gap dropped 7/8 to 28 1/4.
Overseas, Tokyo’s latest rally continued to fade as the rising yen hurt sentiment. The Nikkei index lost 283.91 points to 19,828.43.
In London, the FTSE-100 index jumped 26.1 points to 2,856.1. Frankfurt’s DAX index eased 6.19 points to 1,687.11.
Credit
A bout of selling pushed the yield on the Treasury’s 30-year bond to 6.75% from 6.72% on Monday, but short-term yields fell.
The discount rate on three-month T-bills eased to 2.79% from 2.82% at Monday’s auction.
A report that said housing starts slumped 4.6% nationwide in March may have helped pull short-term yields down. A weaker economy could force the Federal Reserve to ease credit again.
But analysts also said investors are beginning to fear inflationary pressures as the dollar sinks against the Japanese yen. That raises prices on Japanese exports to the United States.
Other Markets
The dollar was trading at an all-time low of 109.97 yen in Tokyo early today, continuing the wild decline that many traders say is unstoppable in the short run.
The market believes that both the United States and Japan favor a surging yen to help U.S. industry sell more goods in Japan. A strong yen makes U.S. goods cheaper in Japan while boosting prices of Japanese goods here.
The dollar had closed in New York on Tuesday at 110.55 yen, down from 111.10 on Monday. Against the German mark, however, the dollar held at 1.597, unchanged.
Elsewhere, gold for current delivery fell 40 cents an ounce to $339.90 on New York’s Comex. Silver added 1.7 cents to $3.92.
On the New York Merc, light, sweet crude oil for May fell 15 cents to $19.84 a barrel.
Market Roundup, D6
