FINANCIAL MARKETS : Dow Dips, Utilities Sink; Oil, Wood Prices Rebound
Market Overview
Blue-chip stocks closed slightly lower Monday, and the broad market also lost ground. Utility stocks took a surprising hit.
* Bond yields inched up as energy and lumber prices surged. But gold continued to ease.
Stocks
The Dow industrials gave up a 20-point early-afternoon gain by the close, finishing down 1.69 points at 3,912.79, after Friday’s surge to new highs.
Monday was only the Dow’s fourth losing session of 1994. But once again, the broad market diverged significantly from the Dow’s performance. The New York Stock Exchange composite index sank 1.37 points, or 0.5%, to 261.75, and losers topped winners on the NYSE by 12 to 9.
Of particular concern was another steep drop in electric utility shares. The Dow utility index tumbled 2.64 points, or 1.2%, to 217.11, the lowest since November, 1992.
Weakness in utilities historically signals rising market interest rates down the road.
Traders said the Dow industrials’ selloff late in the day was mostly the fault of computer-driven program trading. But they noted that, fundamentally, stocks are due for profit taking anyway, after their strong January run.
“Everybody has talked about how high the market is,” said Tom Gallagher, chief trader at Oppenheimer & Co. “It would not be unusual to see the market roll over and have a couple weeks or a couple months of a correction.”
Some traders said a stock selloff in Japan may have cooled enthusiasm in the U.S. market.
Tokyo’s Nikkei index plunged 954.19 points, or 4.9%, to 18,353.24 on Monday, the largest one-day drop since Aug. 19, 1991. The slump was attributed to the surprise failure of political reform proposals in Japan’s parliament.
Elsewhere overseas, London’s FTSE-100 index eased 2.8 points to 3,481.4, while Frankfurt’s DAX index added 16.64 points to 2,090.58.
In Mexico City, the Bolsa index hit a new high, rising 10.53 points to 2,693.71.
Among U.S. market highlights:
* The Dow lost ground despite a surge in IBM, which jumped 3 3/8 to 58 5/8 on optimism about the firm’s 1993 earnings report, due today.
Also gaining in the Dow were Caterpillar, up 1 5/8 to 100 1/4 on the heels of its strong quarterly earnings report Friday; Alcoa, up 1 3/4 to 75 5/8, and Chevron, up 1 1/4 to 92 5/8.
* On the downside, profit takers clipped Procter & Gamble 1 1/8 to 58 1/4; United Technologies was down 1 1/8 to 64 and GM fell 3/4 to 60 1/8.
* Metal and mining stocks helped stoke another rally in heavy-industry shares. Nucor rose 1 3/4 to 58 3/4, National Steel jumped 1 3/4 to 15 7/8 and Reynolds Metals shot up 2 3/8 to 50 1/4.
* Among companies reporting earnings Monday, pinball-game maker WMS Industries gained 1 1/2 to 25 1/4 and apparel maker Tommy Hilfiger jumped 2 3/8 to 32 1/2. But insurance firm SunAmerica eased 7/8 to 37 3/8.
* Software retailer Egghead gained 7/8 to 9 3/4. Paul Allen, co-founder of Microsoft, said he has purchased a 7.5% stake in the firm for investment purposes.
* Modular classroom builder Modtech leaped 1 1/16 to 2 1/16. Some investors bet the firm will benefit from school reconstruction after the Southland earthquake.
Other Markets
Bond market trading was described as technically driven, with little news to propel yields from the narrow range that has dominated recent trading action.
The yield on the Treasury’s main 30-year bond rose to 6.30% from 6.28% on Friday.
In commodities trading, crude oil prices jumped, reversing earlier losses, after the U.S.’s fourth-largest refinery was forced to cut its output following a weekend fire.
Amoco Oil shut three crude-processing units at a refinery in Whiting, Ind., after three fires struck the facility during the weekend.
West Texas intermediate crude futures jumped to $15.17 a barrel, up 23 cents on the New York Merc.
Meanwhile, lumber futures again rose their daily limit as improved weather conditions in the eastern U.S. raised hopes for a resumption of building activity.
Lumber for March delivery settled up $10 to $417.80 per thousand board feet. The March contract has risen its maximum daily limit three times in the past four sessions.
Gold prices weakened again, with near-term futures off 30 cents to $381.10 an ounce on the Comex. Silver closed at $5.11, up 0.4 cent.
Market Roundup, D8
