Tobacco Ruling Stems Stocks’ Fall; Yields Up
The stock market on Thursday fell from record highs on profit taking ahead of the Memorial Day weekend, but its drop was stemmed by a late rally in tobacco stocks on a legal victory for cigarette makers.
The Dow Jones industrial average fell 15.88 points to 5,762.12. The blue-chip average would have ended 20 points lower if not for Philip Morris, which surged on news that a court had blocked a major tobacco liability suit. In the morning, the Dow had come within 4 points of 5,800, just days after its first close above 5,700.
Most broad measures also ended lower as investors found few incentives to bid a pricey market even higher. But many technology stocks bucked the trend, lifting the Nasdaq market to a record high.
“Profit taking has set in after a glorious week,” said A. Marshall Acuff Jr., market strategist at Smith Barney. “Bonds are a little weak, which helped inspire more profit taking with people thinking about the long holiday weekend.”
The yield on the 30-year Treasury bond jumped to 6.85% from 6.81% on Wednesday.
Some of the weakness in bonds was attributed to news that Jeffrey N. Vinik, the beleaguered manager of Fidelity’s Magellan mutual fund had quit.
Vinik’s performance had been widely admired since he took over the country’s biggest mutual fund in 1992, but he had come under attack recently after having made a big move into bonds only to see stocks roar ever higher.
“Vinik’s leaving with $10 billion in bonds on the wrong side,” said Ralph Bloch, chief market analyst at Raymond James & Associates in St. Petersburg, Fla. “If you were taking Vinik’s job and had that king of bond position, what would you do? I’d say, ‘I’m selling out.’ That’s what spooked the bond market.”
The New York Stock Exchange’s composite index fell 1.26 points to 362.43, and the Standard & Poor’s 500-stock index lost 2.42 points to 676. Both indexes, which are dominated by larger companies, had closed at record highs on Wednesday.
The Nasdaq composite index rose 1.27 points to 1,248.65 on near-record volume as several computer-related bellwethers rebounded from some weakness in recent sessions. Microsoft rose 1 5/8 to 118 1/2 and Cisco Systems gained 1 1/2 to 57 1/4.
At the American Stock Exchange, the market value index fell 2.31 points to 612.68, breaking a five-session streak of record-high closes.
Among Thursday’s highlights:
* Tobacco stocks vaulted higher at mid-afternoon after a federal appeals court blocked a class-action suit brought against cigarette makers on behalf of millions of smokers. The ruling could mean tobacco companies won’t have to pay billions of dollars in damages.
Shares in Philip Morris, which were off more than a point before the ruling was announced, jumped 6 1/4 to 103 7/8 on the day--contributing nearly 20 points to the Dow. RJR Nabisco rose 2 to 33 1/8 and Brooke Group gained 3/4 to 6 7/8.
* Saks Holdings retreated slightly from its big gains of Wednesday, its first day of trading. It finished down 2 1/8 at 32 1/2
* Toys R Us was unchanged at 29 1/8. The stock struggled for a second session on news that federal regulators had decided to file antitrust charges against the toy retailer.
* Shares of two initial offerings soared on their first day of trading. Open Market, which makes software for electronic commerce on the Internet, was up 39 7/8 from its initial offering at 18. Suburban Lodges of America, which operates extended-stay economy hotels, jumped to 26 3/4 from 17.
* Also in the tech sector, Sun Microsystems added 1 1/2 to 61 1/4, and Intel rose 1 to 70 7/8.
* San Rafael, Calif.-based NHS Financial was up 1 3/8 at 10 5/8 after agreeing to be acquired by privately held Luther Burbank Savings of Santa Rosa, Calif., for $29.7 million, or $11.50 a share.
Overseas, Mexico City’s Bolsa index fell 1.1%--its first drop in five days--amid concern that interest rates could be headed higher and that the new Magellan fund manager in the U.S. might sell its Latin America holdings. Tokyo’s Nikkei-225 fell 1.1%, Frankfurt’s DAX index rose 0.1% and London’s FTSE-100 fell 0.5%.
The dollar fell against the yen amid renewed concern about higher interest rates in Japan, trading at 106.93 yen, down from 107.03 yen on Wednesday.
