FINANCIAL MARKETS : Dow Dips 11.18 in End-of-Quarter Trading : Market Overview
Stocks meandered to a mixed close Thursday in a session marked by profit taking and maneuvers associated with the quarter’s end. But a key measure of smaller stocks hit a new high.
* Bond yields rose modestly as the market reacted to several reports pointing to a pickup in economic growth. Gold had a small rally but still closed off 6.2% for the quarter.
Stocks
Blue-chip stocks continued to show a lack of conviction as the third quarter ended. The Dow industrials lost 11.18 points to 3,555.12, hurt by a sharp drop in GM.
For the quarter, the Dow was up 1.1%, after peaking in late August at 3,652.09.
Small-company stocks, meanwhile, ended the quarter much as they began it: in a strong uptrend.
The Nasdaq composite index of mostly smaller stocks eased 0.39 point to 762.78, but it was skewed by profit taking in some of the biggest Nasdaq names, including Intel.
Overall, winners topped losers 14 to 9 on Nasdaq on Thursday, a rally that was reflected in the Russell 2000 index, a pure measure of small-stock performance: The Russell gained 1.44 points to a record 252.95.
Buyers also dominated on the New York Stock Exchange, where winners beat losers 11 to 9 on strong volume of 294 million shares.
Analysts said investors remain optimistic, if cautious, about the market and continue to search for companies that should post strong earnings growth. Hence, stocks will be tested by third-quarter earnings reports as they are announced this month.
Earnings tracker Zacks Investment Research in Chicago says analysts expect third-quarter earnings for the Standard & Poor’s 500 stocks to rise 15% on average from a year ago.
Among Thursday’s market highlights:
* GM tumbled 2 1/8 to 41 3/4 in heavy trading on worries about its upcoming contract negotiations with the United Auto Workers. Chrysler, still negotiating with the UAW, eased 1/4 to 48.
* Many of the summer’s best-performing stocks were hit by profit taking as the quarter ended. Computer chip giant Intel, which began the quarter at 55, closed at 70 3/4, down 2 1/2 for the day. Also in the tech sector, profit takers sold Qualcomm, down 3 to 82 3/4; Newbridge Networks, off 3 to 67 1/8, and Advanced Micro Devices, off 1 3/4 to 26 3/8.
* Brokerage stocks, another recently hot group, also fell back. Merrill Lynch sank 2 3/8 to 98, Salomon fell 2 5/8 to 47 3/4 and Paine Webber eased 7/8 to 32 5/8.
* On the plus side, most casino stocks rallied anew. Mirage gained 7/8 to 58 1/4, MGM Grand added 1 to 46, Circus Circus rose 1 to 46 and Players International jumped 1 3/8 to 23. But Caesars World lost 1 3/8 to 48 5/8.
* Many energy stocks extended their third-quarter rally. Chevron added 3/4 to 97 3/4, Halliburton rose 7/8 to 37 1/8, Louisiana Land gained 1 5/8 to 44 5/8 and Enron Oil & Gas jumped 1 3/8 to 53.
Overseas, London’s FTSE-100 index added 7.4 points to 3,037.50 and was up 4.7% for the quarter. In Frankfurt, the DAX index rose 8.02 points to 1,915.71, for a quarterly gain of 12.8%. Tokyo’s Nikkei index added 28.30 points to 20,105.71. It rose 2.6% in the quarter.
Other Markets
Bond yields finished slightly higher for the day but still closed the quarter down dramatically.
The 30-year Treasury bond yield closed at 6.02%, up from 5.99% on Wednesday, as some traders grew nervous about signals suggesting the economy is gaining steam.
The most talked-about indicator was the Chicago purchasing executives survey. Its index of business activity rose to 54.5% in September from 50.2% in August.
That survey, a bellwether of heartland economic strength, could indicate that growth nationwide may be improving, some bond traders said. If so, that could raise new fears of rising interest rates.
Still, most economists believe U.S. growth will continue at a modest pace, without undue upward pressure on interest rates.
Belief in slow growth helped drag bond yields sharply lower in the third quarter. The 30-year T-bond yield began the quarter at 6.67%, and fell below 6% for the first time ever on Sept. 3. Its all-time low was 5.86% on Sept. 8.
In other markets Thursday:
* Crude oil extended Wednesday’s gains on the New York Merc, rising 12 cents to $18.79 a barrel--just slightly below where it began the third quarter. Traders hope that OPEC’s new production accord will bolster prices.
* Gold for current delivery closed on the New York Comex at $355.10 an ounce, up $2.40 from Wednesday. Gold had rallied above $400 in the summer on inflation concerns, but the rally couldn’t hold. The metal is off 6.2% from $378.40 at June 30.
Silver closed at $4.06 an ounce, up 4.9 cents on the day but down from $4.56 at June 30.
* The dollar gained on the Chicago purchasing executives report. In New York, it rose to 106.12 Japanese yen from 105.05 on Wednesday, and to 1.633 German marks, from 1.613.
Market Roundup, D8
How Stock Indexes Fared
Most key market indexes rose in the third quarter, but the market’s strength was clearly in smaller stocks, as measured by the Russell 2000 index. The blue-chip Dow industrials were weak. Russell: 3rd qtr.: +8.4% 9 months: +14.5%
*S&P; mid-cap: 3rd qtr.: +4.5 9 months: +9.4
*Dow industrials: 3rd qtr.: +1.1 9 months: +7.7
*NYSE: 3rd qtr.: +2.5 9 months: +6.3
*S&P; 500: 3rd qtr.: +1.9 9 months: +5.3
Source: Los Angeles Times
