FINANCIAL MARKETS : Dow Rises 9.78 Amid Caution; Nasdaq Stable
Market Overview
Smaller stocks stabilized Wednesday after plunging Tuesday, but the broad market still finished mostly lower. Some blue-chips gained sharply, however.
Overseas, many foreign markets resumed their bull run.
* Bond yields inched lower, while the price of gold advanced more than $3 an ounce, continuing its recent rebound.
Stocks
The Nasdaq composite index of mostly smaller stocks, which had tumbled 14.20 points in heavy profit taking Tuesday, eased 0.46 point to 768.25 as the market calmed considerably.
Losers topped winners by about 13 to 11 on Nasdaq, but that was improved from a 2-1 margin Tuesday.
Meanwhile, the Dow industrials added 9.78 points to 3,645.10 in late buying, but losers edged winners on the New York Stock Exchange. Volume continued to be heavy at 307 million shares.
Analysts said the broad market’s sudden weakness, after last week’s record highs, reflects investor concern that stocks are reaching the upper levels of fair valuation relative to earnings. Thus, profit taking appears to be a prudent route for many short-term investors.
“It’s a continuation of the selloff, just a normal correction,” said Ricky Harrington, analyst at brokerage Interstate/Johnson Lane.
Traders noted, however, that many of the strongest stock groups this year have been hit the hardest, including banks, casino operators and semiconductor makers. Extended weakness in the leaders could significantly undermine the broader market, experts warn.
“There’s no conviction that this market is going to continue running,” said Alice Sadlo, analyst at brokerage McDonald & Co.
Even so, traders said they saw a good deal of bargain hunting throughout the day.
“If you sell, where do you put the money? You’ve got to put it right back in the market,” said Robert O’Toole, head of Nasdaq trading at Lehman Bros.
Among the market highlights:
* Positive earnings surprises boosted several issues, including Compaq, up 2 1/2 to 64 7/8; International Rectifier, up 1 7/8 to 12 3/8; Tupperware maker Premark, up 3 1/8 to 69 1/2; Reebok, up 1 3/8 to 28 7/8, and Stanley Works, up 2 1/8 to 41 1/2.
On the downside, waste management firm WMX Technology lost 4 7/8 to 24 after it posted lower than expected earnings. Rival Browning-Ferris lost 1 7/8 to 21 1/8.
* Casino stocks plunged after Circus Circus said earnings in the quarter ending Oct. 31 will be below expectations.
Circus cited weak business in August, especially at its flagship Circus Circus casino in Las Vegas, although it said business has picked up this month. The firm last week opened the $400-million Luxor hotel-casino in Vegas.
Circus shares plummeted 5 1/4 to 39 1/8, Mirage lost 3 5/8 to 52 3/8, MGM Grand dropped 1 1/4 to 42 3/4 and Promus tumbled 4 to 74 5/8.
* Southwest Airlines plunged 2 7/8 to 31 1/4 despite reporting sharply higher earnings.
* Many industrial issues continued to advance, suggesting underlying optimism about the economy. International Paper gained 1 5/8 to 60 1/4, Caterpillar added 5/8 to 83 1/8, DuPont gained 1/2 to 47, Scott Paper surged 1 3/4 to 35, Dover was up 7/8 to 55 3/8 and Eaton jumped 1 5/8 to 50.
* Drug stocks also had a good day. Upjohn soared 3 to 35 after announcing major cost-cutting efforts. Other winners included Bristol-Myers, up 1 to 59 1/8; Pfizer, up 1 3/8 to 64 3/8, and Lilly, up 7/8 to 54 1/4.
* On the Nasdaq market, telecommunications issues rebounded. Comcast A jumped 2 1/4 to 38 5/8, Lin Broadcasting rose 3 1/4 to 113 3/4 and Tellabs added 1/2 to 72 1/4.,
* Gold stocks followed the metal higher. Echo Bay jumped 3/4 to 12 5/8, American Barrick rose 1 1/4 to 27 and Placer Dome added 1/2 to 24 3/8.
Overseas, the bull market resumed. London’s FTSE-100 index rocketed 26.7 points to a record 3,156.3 on encouraging economic news. Frankfurt’s DAX index leaped 15.80 points to a record 2,042.56.
In Tokyo, the Nikkei index rose 103.51 points to 20,173.42. But profit takers hit again in Hong Kong, where the Hang Seng index slumped 169.72 points to 8,861.41.
In Mexico City, the Bolsa index rebounded 22.32 points to 1,982.86.
Today in Wellington, New Zealand, that market’s key index surged 27.15 points to 2,087.41, the highest since November, 1989.
Credit
Treasury bond yields opened lower in New York after falling in Europe on signs that the Bundesbank, Germany’s central bank, will lower its key interest rates further in early November.
The Bundesbank allowed some money market rates to ease Wednesday.
The Treasury’s 30-year bond yield closed at 5.82%, down from 5.84% on Tuesday. But shorter-term U.S. yields were mostly unchanged.
A narrowing of the gap between German bond yields and lower American yields could make American bonds more attractive to foreign investors, traders noted.
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, corporate bond analyst at Technical Data.
Demand was extremely strong for the $1.8 billion in 10-year bonds, which were sold out by the time New York markets opened.
Other Markets
Gold jumped as the Bundesbank signaled lower interest rates, raising hopes for an economic recovery in Europe and, with it, possible inflation.
Gold futures for December delivery rose $3.50 to $373.80 an ounce on New York’s Comex, the highest price since August.
Silver jumped 11 cents to $4.54.
“Every time the Bundesbank has cut rates, it has helped the gold market,” said a trader with Bear Stearns in New York.
Besides the inflation-hedge attraction, gold gains as interest rates fall because lower rates cut traders’ cost of carrying large gold inventories.
Elsewhere, 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 ended at 1.640 marks in New York, down from 1.641 on Tuesday. The dollar also closed at 107.30 Japanese yen, up from 107.10.
Meanwhile, light, sweet crude oil for November gained 18 cents to $18.24 a barrel.
Market Roundup, D10
