Seesawing Dow Dips 5.22 but Stays Above 6,000
The Dow Jones industrial average see-sawed sharply Tuesday, ending slightly lower, as investors alternated between excitement over good earnings news and profit taking on the Dow’s historic close above 6,000 on Monday.
Most stock measures also fell, but the technology-rich Nasdaq market managed a small gain, padding Monday’s record finish as Intel’s profit report spurred more enthusiasm for computer-related shares.
The Dow fell 5.22 to 6,004.78, rebounding from a nearly 40-point deficit that followed an early 34-point gain. On Monday, the famed blue-chip barometer notched its first close above 6,000, strolling to a 40-point gain in light holiday trading.
Some big deals--an $8-billion rail merger between CSX and Conrail and a $1.5-billion takeover by Warren Buffett’s Berkshire Hathaway--spiced up the session, but trading was dominated by the first barrage of third-quarter earnings reports, which were largely encouraging.
Analysts had expected robust results from Intel, which last month said demand for its computer chips would drive third-quarter profits above expectations. But the final tally, reported late Monday, even outstripped Wall Street’s revised estimates. Intel is closely watched because its microprocessors run about three quarters of all personal computers, making its results a barometer for demand in all PC-related industries. Intel closed at 111 1/8, up 3 1/2.
That helped the Nasdaq composite index notch another record closing high, gaining 1.74 points to 1,258.10. Intel is about 6.5% of the index.
In Mexico, stocks closed lower for the fourth straight day, on anticipation of a dramatic jump in interest rates because of government efforts to help support a weakened peso. The market’s key Bolsa index closed down 36.21 points or 1.1% to 3,251.17, its lowest level so far this month. At the end of 1995, the IPC stood at 2,778.47.
After markets closed, the government indeed announced that the rate on Mexico’s bellwether 28-day cetes, or Treasury bill, rose 3.16 percentage points at weekly auction to 25.90%.
Although a big jump, that compares with expectations of a rise of about four percentage points. Rates for longer maturities also rose.
The peso has weakened substantially in the past week. It strengthened somewhat at session-end on the rate expectation, closing at 7.7200 per dollar.
In the U.S., bond markets were stable, with the 30-year Treasury holding at 6.84%
Among U.S market highlights:
* Bay Networks lost 3 1/8 to 20 7/8 after reporting a drop in its quarterly income and the resignation of its chief executive.
* Among leading technology issues rising with Intel, Microsoft rose 2 1/4 to 138 7/8, and U.S. Robotics soared 8 7/8 to 78 amid speculation the company would unveil a new high-speed modem on Wednesday. Compaq rose 3 1/4 to 75 1/8, Dell Computer added 3 1/2 to 88 3/8 and Gateway 2000 was up 3 3/8 to 56 3/4.
* Companies moving higher after posting stronger quarterly results included Clorox, up 3 7/8 to 101 5/8, Caterpillar, up 2 1/4 to 76 3/8, and Chips & Technologies, up 4 7/8 to 19 3/4.
* Conrail gained 14 1/8 to 85 1/8 after CSX agreed to merge with Conrail in an $8.4 billion deal. The pact values Conrail at $92.50 a share. CSX lost 2 3/4 to 46 3/4. Norfolk Southern surged 3 to 95 and other railroads rose on hopes for further consolidation.
The upbeat mood from Monday’s momentous close on Wall Street spread to major markets overseas early Tuesday. Tokyo’s Nikkei stock average rose 1.9%, Frankfurt’s DAX index rose 1.3%, and London’s FTSE-100 rose 0.3%.
Today, the Consumer Price Index for September is set for release, with economists expecting an increase of 0.3% vs. a 0.1% rise in the prior month. A surprisingly high figure might encourage a sell-off; a very low figure would help stocks.
Cocoa prices on the Coffee, Sugar and Cocoa Exchange ended sharply higher on news the cocoa-rich Ivory Coast would not begin exports on Tuesday. The starting date was pushed back because the government had not yet decided how much to pay farmers for the cocoa beans.
Cocoa for December delivery settled at $1,396 a metric ton, up $17 from the previous day.
