FINANCIAL MARKETS : Stocks Decline in Lackluster Holiday Trading
Stocks sank Friday in thin holiday trading as investors hunkered down ahead of an expected interest rate increase by the Federal Reserve.
The Dow Jones industrial average fell 20.52 to 3,801.47, posting its second consecutive loss and a weekly decline of 6.05 points. The closely watched blue-chip gauge headed lower at the opening bell and deteriorated throughout the session, losing as much as 26 points before recovering some lost ground in mid-afternoon.
Stocks got little direction from the bond market, which was closed in observance of Veterans Day. But bond futures slipped about one-half point before closing early, helping depress stocks, traders said.
Trading was thin, with New York Stock Exchange volume an anemic 218.61 million shares changing hands, down from 280.90 million Thursday.
But declining issues had a substantial 12-to-5 lead on advancers on the Big Board. That suggested to Dudley Eppel, a stock trader at Donaldson, Lufkin & Jenrette Securities, that bearishness was rampant.
“People are a little discouraged,” Eppel said. “If these bond rates go higher, sooner or later people are going to have to sell stocks and buy bonds. There’s not much resistance on the down side.”
Broad-market indexes eroded as well. The NYSE’s composite index fell 1.10 points to 253.25. The Standard & Poor’s 500-stock index lost 2.02 points to 462.35. The Nasdaq composite index of mostly smaller issues slid 2.26 points to 762.12.
Most analysts expect the Federal Reserve to raise short-term rates for the sixth time this year at its Open Market Committee meeting next Tuesday.
“The bond people are focused on whether the November tightening will be 0.50% or more,” said Richard Hoey, Dreyfus Corp.’s chief economist. “I think the stock people aren’t as focused on that. They assume it’s going to be 50 basis points. The issue is, is there more after that, and how much more?”
Mexican shares rebounded somewhat from the previous day’s heavy losses as Telefonos de Mexico regained some ground. The Bolsa index finished 34.67 points higher at 2,526.99 after falling 126 points Thursday, dragged down by Telmex, which dropped in response to a $1-billion joint venture between AT&T; Corp. and Mexican industrial group Alfa that would compete with Telmex in long-distance services.
Telefonos de Mexico’s American depositary receipts rebounded 2 1/4 to 53 1/2 on the NYSE after tumbling 4 3/4 the day before.
Among the market highlights:
* Chiron Corp. ended up 11 3/4 to 71 1/2 in heavy trading of more than 11 million shares on rumors of a takeover price of $100 a share.
* Other bio-tech stocks were lifted by Chiron’s gain. Biogen rose 1 1/8 to 39 7/8, while Amgen added 1 1/2 to 58.
* PepsiCo jumped 1 5/8 to 36 7/8, boosted by upgrades from both PaineWebber and Salomon Bros.
* Microsoft Corp. shed 1-7/16 to 62 1/4 after Goldman Sachs cut its fiscal 1995 earnings per-share estimate.
* Cisco Systems rose 2 3/8 to 33 after reporting strong quarterly earnings at the top end of Wall Street expectations.
In overseas markets, the German DAX 30-share average ended at 2,078.35, down 4.05 points, but up 10.79 from a week ago, while London’s Financial Times 100-share average ended down 27.6 points at 3,075.9, off 22.3 from last Friday. In Tokyo, the Nikkei 225-share average ended up 19.51 points at 19,284.36, a fall of 527.2 from a week ago.
The dollar, meanwhile, ended mixed in muted dealings as currency traders also waited to see what the Fed would do next week. The dollar ended the week in New York at 1.530 German marks, up from 1.529 marks late Thursday and at 97.68 Japanese yen, down from 97.78.
In the commodities markets, sugar futures rose sharply amid higher demand overseas and a world production estimate from the U.S. government that fueled concerns about a shortage. Sugar for March delivery rose 0.38 cent to 13.64 cents a pound on New York’s Coffee, Sugar and Cocoa Exchange, a record high for the contract.
