FINANCIAL MARKETS : Dow Rises 9.78 Amid Caution, Profit Taking
Market Overview
Concern about corporate profits pushed stocks mostly lower in cautious trading Wednesday, although blue-chip issues rallied late in the session.
Overseas stocks resumed their climb after Tuesday’s interruption.
* Long-term Treasury bonds drifted lower in light trading, amid signs that the overseas interest rate climate remains friendly to U.S. government securities.
Stocks
Although the Dow Jones industrial average rallied in the last hour of trading, stocks were mostly caught in the negative psychology that began Monday with fears that the market could not sustain its high levels of the past week, analysts said.
“It’s a continuation of the selloff, just a normal correction,” said Ricky Harrington, senior vice president at Interstate/Johnson Lane.
The Dow finished 9.78 points higher at 3,645.10, on Big Board volume of 307.21 million shares, slightly more than Tuesday’s 304.4 million. In the broader market, declining issues outnumbered advancing ones by about 11 to 9 on the New York Stock Exchange.
With continuation of the week’s profit-taking wave, the Nasdaq average closed 0.46 of a point off at 768.25, --unable to resume last week’s rally into record territory.
“There was little incentive to become aggressive on either the buy or the sell side,” said Michael Metz, investment strategist at Oppenheimer & Co. “There was a cautionary note in the market.”
Instead, investors to corporate profit reports for guidance, analysts said.
“The concerns about future economic growth and the corporate earnings are deepening,” said Hugh Johnson, chief investment officer at First Albany Corp.
Stocks were also supported by a modest bond rally, which pushed interest rates down. Stocks have often taken their cue from the Treasuries because the lower yields that come with higher bond prices make stocks more appealing as investments.
Among the market highlights:
* Sears, Roebuck rose 1 5/8 to 48; Procter & Gamble rose one to 52 3/4.
* Shares of gold mining companies were big winners following a jump in bullion prices to two-month highs. Newmont Mining rose 1 1/2 to 53 5/8; Echo Bay Mines was up 3/4 to 12 5/8; American Barrick added 1 1/4 to close at 27.
* Compaq Computer Corp. shot up 2 1/2 to 64 7/8 after it reported better third-quarter earnings than had been expected.
Good earnings did not help some other stocks.
Analysts said investors moved quickly to grab profits, even in stocks that came through with strong earnings reports.
“Today’s one of the days when people are focusing on their positions and paying attention to individual stocks and what needs to be done to tweak them,” said Douglas Myers, vice president of trading at Interstate-Johnson Lane.
* Other earnings news: WMX Technology lost 4 7/8 to 24 after the company posted lower-than-expected third-quarter earnings. The stocks of other waste management firms also fell. Browning-Ferris, for example, lost 2 to 21.
* Circus Circus fell 5 1/4 to 39 1/8 after forecasting lower-than-expected third-quarter earnings. Other casino stocks followed Circus Circus lower, with Caesars World dropping 1/2 to 47.
* Sybase Inc. ended 1 1/4 off, at 68 1/2. It had rallied to 73 3/4 in early Nasdaq trading after reporting strong third-quarter earnings.
“When people see stocks aren’t responding to good news they tend to cut and run,” said Marshall Acuff, portfolio strategist at Smith Barney Shearson.
Stovall said he was inclined to think, “until further notice,” that the market was going through what he calls transient profit-taking.
Early in the day, most major indexes tried to rally, encouraged by strength in stocks overseas. London’s Financial Times 100-share average closed at 3,156.3, a rise of 26.7 points. The Frankfurt bourse rose 15.80 points to a record closing high of 2,042.56 points on the 30-share DAX average. Tokyo’s 225-share Nikkei average closed up 103.51 points at 20,173.42.
Credit
Treasury yields opened lower in New York, after falling in Europe on signs that the Bundesbank, Germany’s central bank, would lower its key interest rates further in early November.
Thirty-year bond yields closed at 5.82%, down from 5.84% the day before. The bond’s price, which moves in the opposite direction, rose 9/32 point, or $2.81 per $1,000 in face value.
Prices of short-term Treasury securities were unchanged. Intermediate maturities rose by up to 3/32 point, the Telerate Inc. financial information service reported.
A narrowing of the gap between German rates and lower American rates would make interest-bearing, dollar-denominated investments--especially long-term Treasury bonds--more attractive.
The Treasury market also got an early lift from the highly successful sale of the World Bank’s first global bond issue denominated in German marks, said John Atkins, a corporate bond analyst at Technical Data.
Demand was extremely strong for the 3 billion marks ($1.8 billion) in 10-year bonds, which were sold out by the time New York markets opened.
The federal funds rate, the interest on overnight loans between banks, was 2.938%, up slightly from 2.875% late Tuesday.
Other Markets
The dollar was mixed against other currencies as investors sold the greenback to lock in profits from its rise against the German mark this week.
The dollar rose during European trading, along with expectations that Germany would again cut interest rates.
Investors sold off the dollar during New York trading after it failed to rise above 1.621 marks, traders said, but they did not expect the dollar to tumble.
The dollar ended at 1.640 German marks, down from 1.641 marks on Tuesday. It closed at 107.30 Japanese yen, up from 107.10 yen.
Gold prices rose. On the New York Comex, gold for current delivery closed at $372.70 an ounce, up $3.60 an ounce from Tuesday. Silver closed at $4.525 an ounce, up 11.3 cents.
Light, sweet crude oil for November delivery was 0.18 cent higher at $18.24 a barrel.
Market Roundup, D6
