Tobacco Ruling Stems Stocks’ Fall; Yields Up
The stock market on Thursday slipped from record highs on profit taking ahead of the Memorial Day weekend, but the drop in key indexes was stemmed by a late rally in tobacco stocks on a major legal victory for the industry.
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 eased as investors found few incentives to bid a pricey market even higher. But some technology stocks bucked the trend, helping to lift 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 rose to 6.85% from 6.81% on Wednesday.
Some of the weakness in bonds was attributed to news that Jeffrey N. Vinik, 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, analyst at Raymond James & Associates in St. Petersburg, Fla. “If you were taking Vinik’s job and had that kind of bond position, what would you do? I’d say, ‘I’m selling out.’ That’s what spooked the bond market.”
The stock market, however, appeared little affected overall by news of Vinik’s departure. Some investors seemed merely to be shaving their portfolios ahead of the holiday weekend.
Losers topped winners 13 to 10 on the New York Stock Exchange and by a much narrower margin on Nasdaq. The Standard & Poor’s 500-stock index lost 2.42 points to 676.00.
But the Nasdaq composite index rose 1.27 points to a record 1,248.65 on near-record volume, as several computer-related bellwethers rebounded from some weakness in recent sessions. Microsoft jumped 1 5/8 to 118 1/2 and Cisco Systems gained 1 1/2 to 57 1/4.
Among Thursday’s highlights:
* Tobacco stocks vaulted higher at midafternoon 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 of 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.
Among other cigarette makers, RJR Nabisco surged 2 to 33 1/8, Brooke Group gained 3/4 to 6 7/8 and Loews (owner of Lorillard-brand cigarettes) leaped 3 1/2 to 82 1/8.
* In the tech sector, Sun Microsystems added 1 1/2 to 61 1/4 and Intel rose 1 to 70 7/8. But Digital Equipment fell 1 7/8 to 52 5/8 and Computer Associates dipped 1 1/4 to 74 3/4.
* Blue chips hit by profit taking included Rockwell, off 1 5/8 to 56 1/8; Eastman Kodak, off 1 7/8 to 75; and Caterpillar, down 1 5/8 to 67 5/8.
* Shares of two initial offerings soared on their first day of trading. Open Market, which makes software for electronic commerce on the Internet, rocketed to 39 7/8 on Nasdaq from an initial offering price of 18. And Suburban Lodges of America, which operates extended-stay economy hotels, jumped to 26 3/4 from 17.
Also making its debut Thursday: 99 Cents Only Stores, the Southland-based operator of one-price general merchandise stores. The company sold 4.25 million shares at a price considerably above 99 cents: 14 1/2 apiece, to be exact. The stock rose to close at 15 7/8 on the NYSE. The company’s stock ticker symbol is NDN.
* 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.
In foreign trading, 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 the fund’s Latin America holdings. Argentina’s key stock index fell 2.3% and Brazil’s lost 2.7%.
