Stocks End Modestly Lower; Commodities Rise
The stock market finished broadly but modestly lower Monday, with battered technology stocks rebounding.
In commodities trading, a frost forecast in the Midwest drove corn and soybean prices up sharply, pushing a key commodity index to a five-year high. Long-term bond yields also rose.
Stocks opened the day with a selloff, as the Dow Jones industrials quickly slid about 40 points. But buyers resurfaced as trading wore on, and the Dow closed down 17.16 points at 4,780.41.
Trading was moderate, though losers still outnumbered winners by about 14 to 9 on the New York Stock Exchange.
Analysts said the market was still under the influence of last Friday’s quarterly expiration of stock index options, futures and individual stock options. Volatility on the day preceding and the day after such expirations can be excessive because of technical trading games.
A more important force in the market by Monday afternoon was fresh buying of technology stocks, many of which had been hammered Friday on the heels of disappointing financial reports from some key companies.
The tech-heavy Nasdaq composite index, which fell as low as 1,043.41 on Monday, closed off just 0.92 point at 1,050.18. It had tumbled 15.86 points on Friday.
Although the rebound in tech issues encouraged some bulls, analysts said investor nervousness is growing about third-quarter corporate earnings. The last few weeks before the quarter ends usually witness a number of companies warning about earnings shortfalls, and those announcements have begun in earnest.
“It’s just a little more somber out there. People are looking for and finding excuses to lock in” gains on stocks, said Hugh Johnson, analyst at First Albany Corp.
Meanwhile, the hot action on Monday was in commodity pits.
Soybean and corn prices surged, with corn reaching a seven-year high, amid forecasts for an early Midwest frost that would cut short this year’s growing season.
A cold front now developing in Canada is expected to push south into the Midwest by the middle of this week, bringing freezing temperatures to much of the nation’s cropland. The danger of a freeze is heightened this year, traders said, because spring rains delayed planting and forced farmers to leave their crops in the ground later in the season than usual.
Soybeans futures for November rocketed the 30-cent daily trading limit, to $6.6175 a bushel, at the Chicago Board of Trade.
December corn futures leaped 10.75 cents to $3.15 a bushel, the highest for an active contract since July 21, 1988.
Rising grain prices, as well as price gains in cotton, silver, copper and gasoline, sent the Commodity Research Bureau index of 21 key commodities up 2.33 points to 244.72, the highest since May, 1990.
Higher commodity prices, which can be an early warning sign of inflation, may have helped fuel some profit taking in the bond market Monday.
The 30-year Treasury bond yield rose to 6.53% from 6.48% on Friday. The yield hit a 19-month low of 6.46% Thursday on expectations that the still-sluggish economy will give the Federal Reserve Board room to cut short-term interest rates further.
In currency trading, the resurgent dollar pulled back a bit. It closed in New York at 103.35 Japanese yen, down from 104.07 on Friday, and at 1.4798 German marks, down from 1.4890.
Among Monday’s highlights:
* Oracle led tech stocks higher, rising 2 1/8 to 39 3/4 on the heels of Friday’s 7 1/4-point plunge, when the software firm reported slower-than-expected sales growth.
At a San Francisco stock conference Monday, an Oracle executive repeated optimism about better sales growth in coming quarters.
Other tech issues gaining ground included Conner Peripherals, up 1 3/8 to 16 1/4; Dell, up 3 5/16 to 86 1/4; Motorola, up 3 to 81 3/4; IBM, up 1 7/8 to 94 1/8, and Seagate, up 2 to 47.
Adobe Systems rose 1 7/8 to 50 3/4, but after the market closed the software company reported lower-than-expected earnings.
* Many brand-name consumer stocks continued to gain, reflecting earnings optimism. Merck rose 1 1/8 to 54 1/4, PepsiCo leaped 1 1/8 to 50 7/8, Abbott Labs jumped 1 3/8 to 41 3/8 and Philip Morris surged 1 7/8 to 79. Nike set the pace, soaring 7 1/8 to 99 5/8 after issuing a bullish quarterly earnings report.
* On the downside, bank stocks were hit by profit takers. BancOne fell 1 to 35 3/8, Wachovia tumbled 1 5/8 to 43 3/8, Mellon lost 1 1/8 to 45 and First Interstate eased 1 to 100.
* Caterpillar added 1/8 to 65 3/8, but after the market closed the machinery giant said a weaker economy will pull current-quarter earnings below year-ago levels.
* Among Southland issues, biotech leader Amgen sank 2 1/16 to 47 13/16 after brokerage Cowen & Co. downgraded the stock to “buy” from “strong buy.”
Also, CalMat slid 1/2 to 17 3/4. The concrete and asphalt company, hit by a regional strike, forecast lower quarterly earnings, although it said it has nearly completed hiring replacement workers.
In foreign trading, Tokyo’s Nikkei-225 index gave up 439.39 points to 18,319.16.
In Mexico, the Bolsa index slid 24.15 points to 2,541.92.
