FINANCIAL MARKETS : Dow Gives Up a Bit of Last Week’s Gains
Profit-taking after last week’s gains drove U.S. stocks lower Monday, while bonds and the dollar drifted ahead of the Federal Reserve Board’s meeting today.
In Mexico City, the Bolsa stock index plunged 96.48 points, or 4.2%, to a five-month low of 2,231.11 after peasant rebels in Chiapas launched troop movements that raised the threat of war in the troubled southern state.
On Wall Street, the Dow industrial average, which had gained 116 points last week, eased 16.49 points to 3,790.70.
Broader market measures also receded marginally, as losers outnumbered gainers by about 4 to 3 on the New York Stock Exchange.
Analysts said Monday’s trading was in part a snap-back from Friday’s market surge, which was skewed by technical trading related to the quarterly expiration of key stock index option and futures contracts.
NYSE volume on Friday rocketed to 483 million shares, the third-busiest day ever.
Apart from Friday’s expiration-related gains, traders said many buyers had been motivated last week by belief that the Fed won’t raise interest rates when it meets today.
Economic reports last week showing sustained growth with low inflation suggested that the central bank could put off tightening credit again. The Fed has raised short-term rates six times so far this year.
In the bond market Monday, yields closed mixed, though there was little movement either way. Shorter-term yields inched up while the 30-year Treasury bond yield slipped to a two-month low of 7.83%, versus 7.85% on Friday.
In Mexico, meanwhile, the Bolsa index’s 4.2% plunge was its worse since it dropped 4.8% on Nov. 10.
The selling began after after armed men, originally identified as Zapatista rebels, peacefully occupied several towns in the southeastern state of Chiapas.
Radio Red reported that other gunmen, their faces covered with ski masks and kerchiefs, formed roadblocks with trees and boulders to isolate several towns. The highway between Tuxtla Gutierrez, the capital of Chiapas, and San Cristobal de las Casas, one of the largest cities in the state, was among the roads blocked.
“Things are very tense in Chiapas,” said an analyst at Valmex International. “As long as the situation there is unresolved, there will be uncertainty” that will keep many investors from buying Mexican stocks.
The Bolsa is down almost 14% since the Dec. 1 inauguration of President Ernesto Zedillo, in part because of concern that Zapatista National Liberation Army rebels would resume the fighting that killed nearly 150 people in 12 days of skirmishes last January.
Among Monday’s U.S. market highlights:
* Caesars World soared 20 5/8 to 65 7/8 after ITT agreed to buy the gaming company for 67 1/2 a share, or about $1.7 billion. ITT slipped 3/8 to 81 1/2. Other gaming stocks rising on the news included Circus Circus up 1 3/8 to 22 3/4; Primadonna, up 1/2 to 23 1/4; Grand Casinos, up 3/4 to 14 1/8, and Aztar, up 3/8 to 6.
* In other takeover news, U.S. Shoe rose 3/4 to 19 on news that Nine West Group is in negotiations to buy U.S. Shoe’s footwear division. Nine West gained 3/8 to 26 5/8.
* Some industrial issues continued to rebound. Winners included Reliance Steel, up 7/8 to 12 1/2; Paccar, up 1 1/2 to 44 1/4, and Navistar, up 3/4 to 14 5/8.
* Tech issues were mostly lower, hurt by computer chip-maker Cyrix’s warning that the first half of 1995 will be disappointing because of production and pricing problems. Cyrix sank 9 1/4 to 19 1/4. Other losers included Intel, down 1 11/16 to 57 13/16; Texas Instruments, off 1 3/8 to 71 1/4, and Cirrus Logic, down 1 5/8 to 21 1/4.
* Mohawk Industries plunged 3 1/2 to 12 after the carpet-maker said fourth-quarter earnings will be 30% to 40% lower than year-ago results. It blamed higher costs.
In foreign markets, Tokyo’s 225-share Nikkei average rose 107.42 points to 19,270.85. In Frankfurt, the DAX index added 5.88 points to 2,075.94 while London’s FTSE-100 index gained 20.8 points to 3,034.4.
Market Roundup, D12
DAILY DIARY
Dow Jones Industrials High: 3,815.26 Close: 3,790.70
Low: 3,764.46
New York Volume 272.02 million shares
Interest Rates 30-year T-Bond: 7.83% 1-year T-Bill: 7.11%
