Dow Ends Its Record Run; Grains Surge
Mild profit taking ended the Dow Jones industrial average’s winning streak Wednesday, as some investors’ focus shifted to surging grain prices and higher bond yields.
The Dow lost 21.68 points to 5,579.55, although it fought back from a midday decline of more than 40 points.
The day’s drop halted a seven-session string of gains for the blue-chip index.
But in the broad market, winners had a small edge over losers on the New York Stock Exchange and in the Nasdaq market. The Nasdaq composite index bucked the Dow’s trend by rising 0.81 point to 1,088.03 after dipping Tuesday.
“We’re down, but it won’t want to stay down,” said Philip Tasho, investment officer at Riggs Investment Management, which manages $3 billion. The market has “been on an unrelenting tear because [corporate] earnings are great, interest rates are falling and there is nothing real negative out there.”
Traders said market volatility could be significant today and Friday, owing to Friday’s “double-witching,” when key options on U.S. stock indexes and individual stocks expire simultaneously, a regular occurrence on the third Friday of each month.
The bond market could also put some pressure on stocks. Yields rose Wednesday as grain prices jumped again, suggesting inflationary pressures down the road.
Corn futures prices soared to 15-year highs after Tyson Foods, the pork and poultry giant, bought millions of bushels from an Ohio terminal--providing another signal that supplies are growing short.
Corn and wheat inventories are projected to fall to 20-year lows because of poor crops overseas last year and robust world demand.
The jump in grain prices helped push the Commodity Research Bureau index of key commodities up 1 point to 250.68 on Wednesday, a seven-year high.
But some traders said the bond market’s concern is less about commodities than about upcoming economic reports.
The recent decline in yields will be “stalling out here unless we’re fed with more negative economic news, reinforcing the belief that the Federal Reserve is still going to be lowering rates,” said Bob Gahagan, who manages $400 million of fixed-income securities at Benham Group in Mountain View, Calif.
The yield on the key 30-year Treasury bond rose to 6.09% from 6.03% on Tuesday. Shorter-term yields were up less sharply.
The government will report today on manufactured-goods orders for December. A host of reports are due Friday, including January industrial production.
Among Wednesday’s highlights:
* The Dow transportation average ignored the decline in industrial stocks, rising 18.05 points to 2,050.72. Airline stocks firmed after brokerage Morgan Stanley upgraded United Airlines parent UAL to “strong buy,” citing international growth prospects. UAL surged 8 to 175 7/8.
Other winners included American Airlines parent AMR, up 1 1/8 to 82 3/4; Alaska Air, up 1/2 to 20 1/2; and USAir, up 3/4 to 17 5/8. But Northwest slid 2 7/8 to 43 1/2 after launching a round of fare cuts.
* Weakness in the Dow was concentrated in McDonald’s, down 2 1/8 to 50 1/2; and Procter & Gamble, down 1 7/8 to 85 3/4. Both stocks have been surging in recent months.
* Electric and phone utilities also weakened after recent strength. Consolidated Edison fell 5/8 to 33 3/4, Edison International eased 3/8 to 18, BellSouth sank 3 to 41 1/2, Nynex slid 2 1/8 to 53 1/8 and Ameritech tumbled 2 1/4 to 62 5/8.
* The tech sector was mixed. Semiconductor equipment maker Applied Materials rose 5/8 to 39 after reporting quarterly earnings above expectations. Costa Mesa-based FileNet jumped 2 5/8 to 64 3/8, also on strong earnings.
But chip maker Cirrus Logic slumped 3 5/8 to 19 5/8 after forecasting a fourth-quarter loss and revenue below the previous period because of slower-than-expected orders. Another chip maker, Burr-Brown, plunged 6 7/8 to 22 5/8 after warning that orders weakened in January.
Cirrus also said it is re-evaluating an agreement to put $355 million into a Digital Equipment plant in Hudson, Mass. Digital dropped 3 3/4 to 70 1/2.
* Berkshire Hathaway jumped 1,500 to 33,200 one day after the company, headed by legendary investor Warren Buffett, said it will offer lower-priced shares.
* Time Warner gained 1 3/8 to 45 after Merrill Lynch raised its rating on the media giant to “near-term buy.”
* Gold stocks snapped back as futures advanced for a second session, rising $1.20 to $404.20 for February contracts. ASA jumped 1 3/4 to 49, Newmont Gold gained 2 3/4 to 57 3/8 and Homestake rose 1/2 to 19 7/8.
In foreign trading, Mexican stocks rebounded after three days of losses. The Bolsa index jumped 50.53 points to 2,971.25 as the peso strengthened after interest rates rose Tuesday.
Stocks were also sharply higher in Hong Kong, where the Hang Seng index soared 1.5% to 11,364.46.
In U.S. commodities trading, the Tyson corn-purchase news sent March corn futures up 7 cents to $3.78 1/2 a bushel on the Chicago Board of Trade. “It is the first indication that domestics [users] are panicking” about supplies, said Charlie Sernatinger of the grain firm Man International.
March wheat futures rocketed 12.75 cents to $5.28 a bushel and March soybeans gained 12.25 cents to $7.34 1/4 a bushel.
