Dow Industrials Retreat, Then Come Back
The Dow Jones industrials staged a dramatic retreat and comeback Thursday, dropping 70 points on mounting fears of inflation, then gunning into positive territory late in the day to close slightly higher.
The Dow average ended up 1.09 points at 5,487.07, breaking a four-day losing streak that took the blue-chip index down more than 200 points from the record of 5,689.74 set April 3.
The Dow fumbled at the opening following some slightly higher-than-expected wholesale inflation data. It sank sharply twice on computer-driven selling, then sprinted higher into the close, catching some traders off guard.
“My impression is that we got to a level and buyers just came in,” said Ed Lavarnway, head stock trader at First Albany Corp.
But the blue chips pushed ahead of the broader market, which was still dogged by inflation concerns. Declining issues outnumbered advancers by about 7 to 4 on the New York Stock Exchange. Big Board volume was heavy at 519.66 million shares as of 4 p.m., well ahead of Wednesday’s pace and the sixth-highest total on record.
Broad-market indexes ended mostly lower. The NYSE composite index fell 1.55 points to 339.38. The Standard & Poor’s 500-stock index fell 2.32 points to 631.18. The Nasdaq composite index fell 8.14 points to 1,097.14. But the American Stock Exchange’s market value index rose 0.23 point to 570.19.
The NYSE twice imposed trading restrictions, which are intended to ameliorate sharp price swings and are put in place whenever the Dow industrials rise or fall at least 50 points from the previous day’s close.
The market’s recent retreat has been fueled by worries that the combination of a strengthening economy and rising commodities prices will lead to higher inflation. As a result, bond prices have been driven down and interest rates have risen in credit markets.
But on Thursday, the 30-year Treasury bond began a rebound, its yield dipping to 6.93% late in the session from an eight-month high of 6.94% late Wednesday.
Inflation fears were fanned as the Knight-Ridder Commodity Research Bureau commodities index rose 1.76 points at 260.67, trading at an eight-year high for the second straight day.
The rise in commodity prices boosted some stocks, including oil-related shares, but in general it weighed down the market.
Stocks in part were responding to a Labor Department report that wholesale prices shot up 0.5% in March, the biggest increase in three months, fueled by a big jump in winter-related energy costs.
In a second report that supported thinking that the economy is growing, the department said the number of first-time claims for jobless benefits fell by 59,000 last week.
Investors will get another look at inflation today with the release of the consumer price figures for March.
Among market highlights:
* Bank stocks fell sharply, as did other interest-sensitive stocks such as insurance and utilities. J.P. Morgan shares dropped 2 1/2 to 76 1/2, even after the banking company said its first-quarter net earnings rose to $2.13 a share from $1.27 a year ago.
Citicorp shares fell 1/2 to 76 3/8. Merrill Lynch fell 7/8 to 56 1/4. Allstate dropped 1/2 to 38 3/4. The Dow Jones utility index fell 0.49 points, or 0.24%, to 206.40.
Sallie Mae, the Student Loan Marketing Assn., lost 2 1/4 to 74 1/2 after posting disappointing first-quarter results.
* Many retailers Thursday reported sizable sales gains for March after a disappointing Christmas season. Sears added 2 1/2 to 48 7/8 after the company said its sales rose 6.8% in March at stores open at least a year. Woolworth, whose sales gain was 4.6%, climbed 1 3/4 to 17 3/8. But Talbots lost 5 1/2 to 29 1/4; its March same-store sales slumped 7.2%. Lowe’s shed 3 1/4 to 30 after reporting an 8% drop in March same-store sales and warning that its first-quarter results would fall shy of expectations.
* Altera dropped 12 3/8 to 49 1/8. The maker of programmable logic devices said orders in recent weeks have fallen, prompting Wall Street firms to downgrade the company.
* Applewoods, a maker of natural soaps and oils, jumped 9 1/4 to 14 1/4 in its first day of trading.
* Sinclair Broadcast Group rose 5 to a record 32 1/4 after it said it agreed to acquire River City Broadcasting for $1.2 billion.
