FINANCIAL MARKETS : Despite Dow Record, Stocks and Bonds Drift
Stocks drifted through an unimpressive session to a split finish Tuesday as the Dow Jones industrial average crept to another closing high.
Profit taking took the steam out of a rally in technology issues, pushing down the Nasdaq, which lists numerous computer, software and related companies.
Blue-chip stocks chugged forward enough to carry the Dow to a second straight record. It edged 8.65 points past Monday’s high to 4,485.20.
But that didn’t inspire analysts who were discouraged by the market’s breadth, meaning the numbers of stocks that rose compared to those that fell. A closing tally on the New York Stock Exchange showed gainers outnumbered losers by only about 50 issues.
The Nasdaq composite index retreated 3.45 points to 879.40 as some of the excitement over International Business Machines Corp.’s $3.3-billion bid for Lotus Development Corp. died down and investors sold to collect profits.
Among other broad market indicators, the NYSE composite index eked out a new high by inching 0.18 point above Monday’s record, to 288.23. Standard & Poor’s 500-stock index dipped 0.05 point to 535.55, and the American Stock Exchange index fell 0.83 point to 487.88.
Hugh Johnson, chief investment officer of First Albany Corp., said the market didn’t give a convincing performance.
“I think everybody’s worried about the economy and no one is clear whether it’s going to be a hard landing or a soft landing,” Johnson said. “There’s a very intense debate going on about that on Wall Street, and that debate was reflected in the market with a virtual standoff.”
With little in the way of news to guide decisions, investors reviewed their current perceptions about the economy. Recession fears vied with hopes for lower interest rates as investors wondered what impact slower growth will have on corporate results.
Johnson said that in the absence of significant economic news, investors scrutinized data on wholesale trade for April, a report that typically gets little attention.
The figures show unexpected increases in wholesale inventories and in the inventory-to-sales ratio, which Johnson said could portend production and employment cuts. Bulges in inventories frequently precede rocky conditions for businesses and sometimes lead to recessions, he said.
A choppy session in the bond market fed the uncertainty among equity investors. Bond yields bobbed up and down all day before ending with so-so results. The Treasury’s main 30-year bond yield was unchanged from Monday at 6.51%, while its price rose 1/8 point, or $1.25 per $1,000 in face value.
But yields on shorter-term notes and bills moved higher. For a second straight session, investors and traders were seen selling these securities after their value rose in a sharp price run-up Friday.
Yields on three-month Treasury bills rose to 5.67% as the discount rose 0.03 percentage point to 5.51% from the level at Monday’s auction. Six-month yields rose to 5.61% as the discount rose 0.03 percentage point to 5.38%. One-year yields were unchanged at 5.52% as the discount held steady at 5.23%.
Market participants who assume rates will recede further favored interest-sensitive stocks, such as those of insurance companies, analysts said.
In the currency markets, the dollar advanced against most major currencies, benefiting from optimism that the Group of Seven industrialized nations will re-pledge support for a stronger dollar when they meet next week.
In New York trading, the greenback closed at 84.68 Japanese yen, down from 84.90 on Monday. It was also quoted at 1.4110 marks, up from 1.4105.
Among Tuesday’s highlights:
* Lotus Development rose 3/8 to 61 13/16. The stock attracted investors as IBM launched a tender offer for Lotus at $60 a share. IBM rose 5/8 to 91 7/8 on the NYSE.
* Many semiconductor stocks fell prey to late profit taking, including Intel, off 3 3/8 to 112 3/8; Cypress Semiconductors, off 7/8 to 34, and Applied Materials, down 1 3/4 to 80. Texas Instruments tumbled 5 to 117.
* Pep Boys fell 1 3/8 to 30 1/2 after it was taken off CS First Boston’s focus list and Raymond James downgraded the stock.
* United Technologies rose 1 to 78 1/2 after Lehman Bros. issued a strong “buy” rating on the stock.
* TIE/Communications jumped 2 1/8 to 7 following news that it picked a committee of independent directors to consider ways to boost shareholder value, including the possible sale of the company.
* Qualcomm, which rose 1 1/2 on Monday, added 5 1/4 to 34 3/4. PCS PrimeCo chose technology licensed from Qualcomm for its Personal Communications Services network.
* Dialogic lost 3 7/8 to 19 3/8. Hambrech & Quist cut the stock to “hold” from “buy.”
* Fibreboard rose 2 5/8 to 20 1/2 after it announced that it was considering selling its wood products group and plans to buy back as much as $20 million of its shares.
Big Board volume totaled 340.49 million shares, compared to 338.35 million on Monday.
Stock were mixed overseas. In Tokyo, the Nikkei 225-share average shed 236.33 points to closed at 15,660.99. In Frankfurt, the 30-share DAX average rose 10.14 points to 2,146.40, and London’s Financial Times 100-share average ended at 3,380, up 3.4 points. Mexico City’s Bolsa index fell 22.88 points to 2,001.01.
