FINANCIAL MARKETS : Stocks Close Modestly Lower After Steep Fall
U.S. share prices recovered from another sharp decline Friday to finish moderately lower in active trading, capping a tumultuous week that raised questions about the bull market’s health.
The Dow Jones industrial average ended down 3.98 points at 5,061.12 after sinking more than 40 points early in the day.
For the week, the Dow lost 120.31 points, as investors took profits in the wake of the balanced-budget stalemate in Washington and growing concern about the economy’s health.
“We may not get a budget, and a cloud of uncertainty will hang over us until November. I can’t imagine a worse scenario,” said a gloomy Ricky Harrington, technical market analyst at brokerage Interstate/Johnson Lane.
Stocks were helped Friday when the bond market rallied late in the session, which ended two hours early so traders could get a jump on the Martin Luther King Day holiday weekend. In a volatile session, the 30-year Treasury bond yield finished unchanged at 6.14%.
A report from the Federal Reserve Bank of Atlanta showed a drop in the number of manufacturers in that region reporting increased production--another sign of a weakening national economy.
Also, oil and gold prices fell for a second day.
While all of those factors helped pull bond yields down from the day’s highs, the T-bond yield still ended the week sharply above its level of 6.04% a week ago. Fears that Congress and President Clinton won’t strike a balanced-budget deal had caused bond yields to surge midweek.
With stocks, meanwhile, the threat of slower corporate earnings growth in an anemic economy is encouraging more investors to cash in some of the huge gains wracked up in 1995, when shares surged, analysts say.
Some fourth-quarter earnings reports this week have been encouraging, but many more reports are due in coming weeks and will be closely scrutinized by nervous investors.
“People can’t get their hands on what earnings are going to come in like in the computer industry and other industries, in this quarter and especially in future quarters,” said Steven Zenker, money manager at McCabe Capital Managers, which oversees assets of $115 million.
Many technology stocks dropped again Friday. They had plunged in midweek, then rallied somewhat Thursday.
The Nasdaq composite index, heavily weighted with tech stocks, fell 2.87 points to 1,008.23 on Friday. For the week, the index lost 25.24 points or 2.4%.
Among Friday’s highlights:
* In the tech sector, computer networker NetManage plunged 3 11/16 to 10 7/8 as it became the latest tech firm to warn of disappointing fourth-quarter results.
Also, Dell Computer plunged 4 7/8 to 28 5/8 after analysts at three brokerages modestly reduced estimates of Dell’s fourth-quarter earnings, citing narrower margins.
Other tech losers included Micron Technology, down 2 7/8 to 33; Cabletron Systems, off 2 1/4 to 72 1/2; Apple, off 1 1/8 to 33 7/8; Sybase, down 2 3/4 to 28 3/4; and Quarterdeck, which lost 2 1/8 to 20.
* Energy stocks sank as oil futures prices slumped again, in the wake of forecasts for warmer weather in the storm-battered East. February crude oil futures lost 54 cents to $18.25 a barrel, the lowest level in six weeks, at the New York Merc.
Exxon fell 1 1/8 to 79 5/8, Mobil dropped 2 3/4 to 110, Unocal slid 3/4 to 28 1/2, Coastal was off 3/4 to 35 3/8 and Enron lost 5/8 to 36 3/4.
The abnormally cold Eastern winter thus far has increased demand for fuel oil, but the snow has kept cars off the roads and reduced gasoline consumption, analysts noted.
* Profit takers hit some entertainment issues. Time Warner lost 1 3/8 to 38 7/8, Viacom Class B fell 1 3/8 to 39 3/8 and Mirage Resorts lost 1 1/8 to 37 5/8.
* Ride, a maker of snowboards, plummeted 8 1/2 to 25 after the company said 1996 earnings will be depressed early on by higher costs, but should rise later in the year.
* On the upside, Wells Fargo shares rebounded after a steep fall midweek. The stock leaped 9 5/8 to 212 3/4.
* Investors returned to some classic growth stocks that may fare better in a dicey market. Johnson & Johnson rose 2 to 85 3/4, Philip Morris surged 2 3/8 to 90 1/4 and Anheuser Busch rose 1 1/4 to 67 1/4.
* NYSE-traded shares of Telmex tumbled 2 to 32 3/4 after the Mexican phone giant’s largest shareholder, Grupo Carso, said it will spin off its stake in Telmex. In Mexico City, the Bolsa stock index fell 63.14 points to 2,934.13.
But many other foreign markets continued to advance. Hong Kong’s key index rose 1%, Singapore’s jumped 1.4% and Brazil’s gained 2.1%.
