Philip Morris Drags Dow Down 15.17
In a return to a more normal day on Wall Street, blue-chip stocks fell Wednesday, pressured by a big drop in the shares of Philip Morris, but the broader market trudged higher as investors hunkered down ahead of upcoming inflation data.
The Dow Jones industrial average closed 15.17 points lower at 5,568.72, but the Standard & Poor’s composite index of 500 stocks rose 1.46 points to 638.55.
The stock of tobacco giant Philip Morris, one of the 30 that constitute the Dow, lost 3 3/8 to 98, which accounted for 10 points of the index’s loss.
In the broader market, advancing issues beat declines 1,512 to 881 on active trading of 409 million shares on the New York Stock Exchange.
Philip Morris was hurt by news that Liggett Group, the smallest of the five major U.S. tobacco companies, agreed to settle its part in the biggest liability case pending against the tobacco industry.
Traders said that with Liggett settling, there were fears that Philip Morris will get hit even harder because it is a bigger company with more to lose.
The rest of the market was fairly stable compared with recent volatile sessions. But the Nasdaq composite index rose 15.59 points to 1,088.64 on renewed strength in high-technology stocks.
“Tech stocks are obviously doing better, and they make up such a large portion of this market,” said Dennis Green, director of over-the-counter trading at Everen Securities.
Semiconductor stocks were helped by Tuesday’s release of February’s book-to-bill data, a measure of new orders against shipments, which confirmed a soft market for chips but reassured Wall Street by matching expectations.
“Stocks seem to have settled into a range waiting for all the upcoming data,” said Marty Kearney, a trader at PTI Securities, who was relishing the day’s subdued trading.
The Dow index tumbled 171 points Friday after a stronger than expected February jobs report dashed hopes that the Federal Reserve would again cut interest rates.
On Monday the Dow soared 110 points, and Tuesday it ended up 2.89 points after earlier falling 95 points.
Treasury yields rose Wednesday despite news that seemed to assuage some concerns raised by last Friday’s report of extraordinary employment growth.
The yield of the Treasury’s main 30-year bond rose to 6.69% 6.66% late Tuesday.
In Wednesday’s news, the Federal Reserve reported that the U.S. economy grew moderate to strong in February following January’s severe winter storms. While the report portrayed an upbeat economy, the strength did not match the powerful jump in U.S. employment reported Friday by the Labor Department, which said 705,000 workers were added to payrolls in February.
The upcoming economic reports include today’s Producer Price Index for February and Friday’s Consumer Price Index.
“Because the economy (appears to be) growing more rapidly and we’re at full employment, people would look at bad inflation reports as potentially a harbinger of a worse inflation trend,” said William Dudley, senior economist at Goldman Sachs & Co.
Wall Street has been worried that a stronger economy would prompt the Federal Reserve to defer a new cut in interest rates, or possibly even raise lending rates.
Analysts expect more volatility in stock ahead of Friday’s so-called triple-witching hour--the expiration of stock futures, options and index options.
Among market highlights:
* Among tobacco stocks, Loews, which owns Lorillard, was off 5/8 to 81. BAT Industries ADRs dropped 7/8 to 15 3/4. RJR Nabisco Holdings fell 1/2 to 33 7/8, and Brooke Group, which owns Liggett, climbed 1 1/2 to 9 7/8.
* Toys R Us rose 1 5/8 to 27 5/8 after it reported earnings that surpassed Wall Street estimates and announced plans to open 55 new stores outside the United States this year
* Microsoft climbed 5 1/8 to 100 7/8. Merrill Lynch named Microsoft its “Focus One” stock of the week and upgraded it.
* Oil stocks rose as April crude oil futures rose 12 cents to $20.58 a barrel. Texaco rose 3/8 to 83 1/8, and Occidental Petroleum advanced 1 3/8 to 25 3/8.
* Retail stocks rose amid mounting hope about spring sales. Kmart rose 5/8 to 8 7/8 in leading volume on the Big Board, while J.C. Penney added 1 1/4 to 50 1/4 and Sears climbed 7/8 to 50 1/8.
Most European markets ended unchanged or higher but German shares in Frankfurt fell, edgy in advance of the expiration of DAX futures contracts Friday and was also fearful of what would happen to U.S. interest rates. The DAX index closed down 9.59 points to 2,426.38.
Tokyo stocks, their sentiment depressed by the prolonged budget impasse in parliament, closed lower on bearish U.S. semiconductor data and weak futures. Worries about the fate of the budget allowing the mortgage firm wind-up scheme kept buyers away from the market. The Nikkei average was down 215.57 points at 19,734.70.
