FINANCIAL MARKETS : Disney Deal Can’t Save Dow, Which Drops 7; Yields Fall
Despite a buying frenzy in the entertainment sector after Walt Disney announced it will buy Capital Cities/ABC for $124 a share, the broad stock market closed mixed on Monday in slow trading.
The Dow Jones industrial average lost 7.04 points to 4,708.47 and most other key indexes also were modestly lower, although winners edged losers by 11 to 10 on the Big Board.
Analysts said another selloff in technology stocks overshadowed the positive influence of the Disney/Cap Cities deal, the second-biggest merger in U.S. history.
Indeed, sharp declines in such major tech stocks as Microsoft and Intel--the market leaders for most of this year--caused some analysts to warn that Wall Street may be on the verge of a long-awaited pullback.
“Technology stocks are starting to lose their momentum,” said Don Hays, director of investment strategy at brokerage Wheat First Butcher Singer in Richmond, Va. “That may start spreading to other sectors.”
Some entertainment and media stocks, however, may be immune to declines in the near term if Monday’s action is a guide.
Investors bid up most TV, movie and cable stocks on expectations that Disney’s surprise purchase of Cap Cities will spur another round of consolidation in the business, as “software” producers such as studios seek to lock up new media outlets for their programming.
Cap Cities stock surged 20 1/8 to 116 1/4 and Disney gained 1 1/4 to 58 5/8. Disney was the most active NYSE stock, with 6.9 million shares changing hands.
Elsewhere, CBS rose 1 7/8 to 77 3/4 as some traders surmised that Westinghouse Electric, rumored to be readying a bid for the ailing network, will have to raise its price. Westinghouse fell 1/4 to 13 5/8.
Some traders also may have been betting that other entertainment giants will feel compelled to join the bidding for CBS, in the wake of Disney’s move.
Among possible bidders, MCA Inc. parent Seagram rose 5/8 to 36, Viacom A shares added 1/4 to 50 7/8 and Turner Broadcasting Class A shares rose 1 to 21 3/4.
Among other entertainment and media stocks, TV station owner Chris Craft surged 3 to 43 3/8, radio company Infinity Broadcasting gained 1 1/2 to 37, cable TV giant Tele-Communications added 3/4 to 25, Time Warner inched up 1/4 to 42 7/8 and Gaylord Entertainment jumped 1 3/4 to 27 3/8.
General Electric, parent of NBC-TV, rose 1/4 to 59.
Apart from the media frenzy, the market’s tone should have been helped by a renewed slide in bond yields. Despite several reports suggesting economic activity is beginning to pick up again, the yield on the 30-year Treasury bond slipped to 6.84% from 6.90% on Friday.
Other important economic reports to be released this week include the National Assn. of Purchasing Management’s manufacturing-sector index, the government’s leading-indicators index, and July employment.
But many analysts warn that continued weakness in tech stocks could undercut the market, even if bonds rally.
Among Monday’s highlights:
* Major technology shares were battered by profit-taking for a second consecutive session. Analysts cited concerns that the Justice Department might try to halt Microsoft’s shipments of its new Windows 95 software product on anti-trust grounds.
Microsoft slumped 2 1/8 to 90 1/2, and now is down 17% from its recent peak of 109 1/4.
Other tech losers included Intel, down 2 1/8 to 65; Hewlett-Packard, off 2 1/4 to 77 7/8; Cabletron Systems, down 3 3/8 to 52 7/8; Dell, down 2 1/8 to 65; Autodesk, off 2 3/8 to 45 1/4, and Motorola, which lost 1 3/8 to 76 1/2.
* Another big loser was USAir, which slumped 1 5/8 to 9 1/2 after ending talks with its unions on a wage concession and restructuring package.
* On the plus side, Wallace Computer soared 14 1/2 to 58 3/8 after Moore launched a hostile takeover bid of 56 a share, or $1.3 billion.
* Among Southland issues, Insurance Auto Auctions plunged 9 to 17 on worries over the company’s second-quarter earnings report, due later this week.
Calabasas-based Cheesecake Factory rose 1 to 26 3/4 after the restaurant chain reported higher earnings. And racetrack operator Hollywood Park soared 2 1/8 to 14 after the California Legislature’s passage of a bill that would allow the company to operate its own card club.
The bill passed Saturday has yet to be signed into law by Gov. Pete Wilson, said Michael Finnigan, Hollywood Park’s chief financial officer.
In commodities trading, natural gas futures soared 6% to a six-week high amid concern that a tropical storm now in the Atlantic Ocean could gain strength and move into the Gulf of Mexico, disrupting production.
Natural gas for September delivery on the New York Mercantile Exchange surged 9.1 cents to $1.614 for each million British thermal units, the highest price since June 19.
