Profit Taking Clips Techs, but Dow Sets Record
The Dow industrials pushed further into record territory Wednesday as investors sought the safety of blue-chip stocks, but high-technology issues fell sway to profit taking after a recent run-up.
“Technology stocks are correcting very sharply here and there’s a move to quality today,” said A.C. Moore, a senior investment strategist at Dunvegan Associates.
The Dow Jones industrial average climbed 32.51 points to 5,492.12, scoring its 10th record closing high for 1996 and the sixth in the last seven sessions.
Gainers beat losers by a slim 1,204-to-1,128 margin on the Big Board, where volume reached a heavy 455 million shares, compared with 466 million on Tuesday.
The S&P; 500 index also rose 3.60 points to 649.93, its seventh record closing high for the year.
But the tech-heavy Nasdaq composite lost 4.20 points to 1,084.88 after setting three consecutive record closing highs.
After chip makers scored solid gains, Montgomery Securities and Hambrecht & Quist downgraded semiconductor equipment makers on pricing pressures for dynamic random access memory (DRAM) chips used in computers and consumer electronics.
LAM Research fell 6 1/2 to 45 1/2, Novellus shed 5 5/8 to 54 1/8, Applied Materials was off 4-3/16 to 39-15/16 and KLA Instruments was down 4 1/8 to 30 1/8.
“Chips stocks rose 40% in three weeks so they’re due for a normal timeout. Today we went out of high techs and into blue chips,” said Alfred Goldman, technical research director at A.G. Edwards. “We’re seeing rotation.”
Analysts said interest was shifting to the safety of blue-chip stocks, since many other sectors have already had sharp run-ups this year.
“The big noise today is profit taking in the techs,” said Philip Orlando, chief investment officer at Value Line Asset Management,
who added that he remains bullish on the group.
Orlando is attending Goldman Sachs’ technology conference, which started Tuesday and ends today, “and from the presentations I’ve seen, there’s nothing that discourages me from thinking that techs are the place to be.”
But Moore cautioned that high technology remained under pressure in the near term.
“The chip stocks haven’t built enough of a technical base. They’re probing their old highs and are failing to mount a sustained advance beyond that,” Moore said.
Among market highlights:
* General Re lost 5 1/4 to 146 3/8. The reinsurance company lost a major domestic account representing about $230 million in premiums, which will result in much slower-than-expected domestic premium growth in 1996, analysts said.
Reinsurance stocks falling in sympathy included National Re, off 1 5/8 to 33, and Trenwick Group, off 1 1/2 to 51 3/4.
* Hilton Hotels shed 3 1/2 to 86 3/8. The shares have climbed since the company announced it had hired Disney CFO Stephen Bollenbach as its president and CEO.
* ManPower Inc. rose 2 1/2 to 29 5/8 after reporting stronger-than-expected fourth-quarter earnings.
* Some IPOs drew strong buying. Raptor Systems, a developer of a family of software products that provide security for organizational networks, jumped 9 3/4 to 24 3/4. Renal Care surged 6 to 24.
* Learmouth & Burchette tumbled 4-9/16 to 5-3/16 in U.S. trading after forecasting a third-quarter loss on lower-than-expected revenues.
* Bell Atlantic rose 1 5/8 to 72 3/8 and Nynex added 3 3/4 to 59 1/8. The two companies are deep in merger negotiations, a source familiar with the talks told Reuters.
High-flying grain prices dipped Wednesday after an expected Russian purchase failed to materialize.
“The market still looks overall strong, but demand is not real aggressive right this second,” said Ron Kucha of O’Connor and Co.
The market has soared on the lowest grain stocks in 20 years. Wheat also got a boost recently on rumors Russia would buy 2.5 million metric tons of U.S. grain.
But a Russian official said there has been no discussion about the United States granting credits to Russia for a grain purchase. Russia plans to buy grain from its own farmers.
At the Chicago Board of Trade, March wheat fell 9 cents to $5.13 1/2 a bushel.
A government report on soybean meal and oil stocks showed supplies above what analysts had expected, pressuring soybean prices.
The market has been undermined by improved rainfall in South America, the second-largest source of soybeans after the United States. Traders are looking forward to Friday’s Agriculture Department report. March soybeans dropped 5.75 cents to $7.23 1/2.
In other commodity markets, gold prices declined again while energy prices were mixed.
The Knight-Ridder Commodity Research Bureau’s index of 17 commodities declined 0.28 to 246.33. At the Commodity Exchange in New York, gold retreated further from recent six-year highs as some investment funds that entered the gold market rally only recently backed out.
“The market is a bit burdened by fund longs,” said William O’Neill of Merrill Lynch, referring to them as “Johnny-come-latelies” to the month-long surge in gold prices.
April gold fell $3.20 to $411.40 an ounce, the largest one-day correction the market has seen this year.
