Dow Off 12.56; Oil Futures End Wild Ride
Blue-chip stocks snapped a nine-session winning streak Tuesday as investors took profits after the Federal Reserve Board, as widely expected, left interest rates unchanged.
“It’s kind of like buying on the rumor and selling on the inaction,” said Marty Kearney, a trader at PTI Securities.
The Dow Jones industrial average ended 12.56 points lower at 5,736.26, retreating from Monday’s record high of 5,748.82. The index had climbed 175 points in the last nine sessions.
Oil futures prices stabilized as traders caught their breath after Monday’s wild ride that was sparked by a settlement of the Iraq oil-sale talks.
Light, sweet crude for June delivery settled at $22.65 per barrel, up 17 cents. But oil for delivery in later months fell. Traders said the reason for the discrepancy was that the June contract expired on Tuesday and current refinery demand is strong, while later contracts dropped following big run-ups Monday.
While Iraq sales could depress prices by adding to world oil supply, Peter Beutel, an oil analyst at Cameron Hanover Inc. of Bronxville, N.Y., said that for the long term, the agreement should be positive for oil prices because it removed uncertainty that had been dogging the market for months.
The new Iraq sales will amount to “less than 0.75% of the daily world demand,” Beutel said, not “enough to tip the market’s balance.”
In the broad stock market, declining issues led advances 1,226 to 1,144 on active trading of 409 million shares on the New York Stock Exchange. The Nasdaq composite index, which set its 27th high for the year on Monday, fell 3.69 points to 1,244.42.
The more speculative segments of the market outperformed the blue-chip sector for most of Tuesday’s session, lifting the American Stock Exchange to its fourth straight record high, but most broad indicators finished lower.
The central bank’s Federal Open Market Committee issued a brief statement at midafternoon saying, “There is no announcement,” in effect leaving the key federal funds rate unchanged at 5.25%.
Shortly after the Fed announcement, however, came a report showing an increase in retail sales during the first two weeks of May.
The Johnson Redbook report “was stronger than expected,” suggesting continued robust demand that could push up consumer prices, said Steven Goldman, market strategist at Weeden & Co. in Greenwich, Conn.
Yields on 30-year Treasury bonds--a sensitive barometer of inflation fears--edged higher to 6.85%.
The rise in interest rates helped spur some profit taking in stocks, Goldman said.
“We’re somewhat overbought. Looking back, we’re up sharply in the last two weeks,” he said, noting the 5.5% increase in the S&P; 500 over that period.
Among market highlights:
* After leading Monday’s rally on the increase in crude oil prices, energy stocks led the market lower as investors took some profits. The Dow’s three oil stock components were among the four biggest losers in the blue-chip average. Texaco fell 1 7/8 to 85, Chevron fell 1 1/2 to 60 1/2 and Exxon lost 1 1/8 to 86 1/8-- combined, a loss of more than 14 Dow points.
* Gucci Group climbed 5 1/4 to 70 7/8 in U.S. trading after the Italian luxury goods maker said its first-quarter revenue soared 113%.
* Wyndham Hotel jumped 6 5/8 to 22 5/8 in its first day of trading.
* Dayton Hudson surged 4 to 106 on better-than-expected first-quarter profit.
* Compuware jumped 6 5/8 to 37 1/8 after reporting a jump in quarterly earnings.
* UAL, the parent of United Airlines, added 2 3/8 to 59. Lehman Bros. upgraded its opinion of the carrier.
* ITT rose 1 3/8 to 61 1/8 after winning a license through its Caesars casino subsidiary to develop and operate a riverboat casino in Indiana.
Overseas, Tokyo’s Nikkei stock average rose 0.5%, Frankfurt’s DAX index rose 0.8% and London’s FTSE-100 rose 0.3%.
Meanwhile, the dollar rose to a 16-month high against the mark on Tuesday after a German central banker encouraged dollar buyers amid economic figures that continued to show Germany at least on the brink of recession.
“Basically, the story today was written in Germany with the decline of the deutsche mark,” said Guillermo Estebanez, a foreign exchange economist at the Bank of America office in San Francisco. “Today was the day for the deutsche mark.”
