Dow Revives Itself on Bargain Hunting
Blue-chip stocks clawed their way to the plus side Wednesday as bargain hunters helped the index overcome a deficit of more than 76 points. But most stocks fell, particularly on the Nasdaq market, which lost ground as investors again pounded technology stocks.
The Dow Jones industrial average ended up 8.14 points at 5,354.69, having rallied 84.34 points from an early low of 5,270.35.
It was another highly volatile day. “If you don’t like where the market is, just wait a minute,” said Arthur Hogan, the head stock trader at Dean Witter Reynolds. “These things are fluctuating so much it’s just driving everybody crazy.”
The Dow movements masked an overall market retreat. There were nearly three declining issues for every advancing issue on the New York Stock Exchange.
“People are selling their secondary stocks and using what they have left to go into the top tier,” said Michael Metz, vice president of Oppenheimer & Co. “You’re getting a panic liquidation in the technology sector.”
The Nasdaq composite index closed with a loss of 6.70 points at 1,042.37 after shedding more than 30 points earlier.
Ferocious selling greeted the market from the opening, triggering a sell-off of more than 50 points in the Dow index before bargain hunters emerged to salvage some stocks. Twice the NYSE’s limits on program trading were activated.
Analysts said Wall Street was preparing for the release early today of the quarterly results of bellwether IBM.
“The market was hit at the open by several waves of selling, but diminishing waves,” said Thom Brown, a managing director of Rutherford Brown & Catherwood.
“That’s good market action,” he said. “We’re getting all the weak holders shaken out.”
He noted that some key stocks were rallying, including Hewlett-Packard, up 2 1/2 to 43 1/2, and IBM, up 7/8 to 91 3/8.
IBM is expected to report a drop in second-quarter earnings, hurt by a sluggish European business environment and a negative currency translation.
“The gyrations are part of the market’s short-term base-building process,” said Stephen Shobin, technical analyst at Lehman Bros.
Shobin was somewhat encouraged that the stock market held steady when bonds turned lower. The closely watched 30-year Treasury bond yield, which moves in the opposite direction of price, rose to 7.04% from 6.97% at Tuesday’s close.
Technology traders searched for a market bottom as the Nasdaq composite hovered at a six-month low.
Investors were encouraged by news that Compaq Computer’s earnings jumped 9% in the latest quarter, rising to $267 million, or 96 cents a share, from $246 million, or 90 cents. The earnings beat Wall Street estimates, which averaged 91 cents per share. Compaq rose 3 to 48 1/4.
Among Wednesday’s highlights:
* PCI Service climbed 5 3/8 to 21 1/2 and Cardinal Health fell 2 1/8 to 67 after they agreed to merge in a deal valued at $201 million.
* Fritz tumbled 15 1/4 to 12 1/4 after posting a loss for the quarter.
* DuPont rose 2 3/8 to 77 1/4 on stronger second-quarter results and the company’s forecast of an improved second half.
Other companies reporting upbeat results included U.S. Surgical, which gained 4 3/8 to 31 3/4; Cadence Designs, up 2 5/8 to 25 1/8; Ralston-Purina, up 2 to 61 1/4; and Peoplesoft, up 7 3/4 to 65 1/2.
Wall Street’s troubles are rattling markets overseas. Before the start of trading in New York, Tokyo’s Nikkei stock average fell 2.5%. In Europe, Frankfurt’s DAX index fell 1.1%, and London’s FTSE-100 fell 1.1%.
U.S. wheat prices continued to fall amid concern that further cancellations of sales to China may be imminent, linked to the ongoing dispute between the countries over fungus contamination.
Traders said they believed that at least 300,000 tons of U.S. soft red winter wheat sales to China were set to be canceled, following the announcement Tuesday that sales of almost 750,000 tons of hard red winter wheat had collapsed.
“I heard they did cancel. There has been no confirmation, but it pounded wheat into submission,” said Vic Lespinasse of Dean Witter Reynolds.
September soft red winter wheat on the Chicago Board of Trade closed down 12 3/4 cents at $4.41 a bushel.
