Dow Drops 43 to Below 6,000; Nasdaq Is Firm
High-flying blue-chip stocks were hammered by profit takers for a fourth straight session Thursday, although the broad market held up reasonably well.
In volatile trading, the Dow Jones industrial average slumped 43.98 points to 5,992.48, the first close below the 6,000 mark since Oct. 11.
Some traders said the catalyst for the Dow’s latest slide was a jittery bond market, as fresh worries surfaced that the economy might be stronger than expected.
But many analysts said blue-chip stocks are simply in the midst of some overdue profit taking after the Dow rocketed 748 points, or 14%, between July 24 and last Friday.
“The stock market is in a correctional phase anyway, and why not? We’ve had a tremendous run . . . “ said Alfred Goldman, analyst at A.G. Edwards in St. Louis.
At the same time, the overall market wasn’t terribly weak Thursday. Losers just edged winners on both the New York Stock Exchange and the Nasdaq market.
The Russell 2,000 index of smaller stocks rose 0.15 point to 343.08, suggesting that some of the money coming out of blue chips was going into ignored smaller issues. Likewise, the Nasdaq composite index held fairly firm, off just 0.88 point to 1,227.00.
The Dow, which gave up a total of 58 points in the first three days of this week, bounced wildly Thursday, falling in the morning, rebounding at midday, then dropping again in the final two hours.
The bond market didn’t help, as yields rose modestly in nervous trading. The 30-year Treasury bond yield ended at 6.85%, up from 6.83% on Wednesday.
The Labor Department said Thursday that the number of U.S. workers filing first-time claims for jobless benefits fell by a surprising 22,000 last week to the lowest level in nearly two months.
That suggested strength in the economy, which could revive fears of a credit-tightening move by the Federal Reserve Board.
More economic data is due today, including reports on September durable-goods orders and sales of existing homes.
Meanwhile, third-quarter earnings reports continue to vie for investors’ attention. The news so far has been good overall: Of the 375 blue-chip companies in the Standard & Poor’s 500 index to report so far, 52% have beaten analysts’ expectations and 32% have missed them. The rest were in line with estimates.
Among Thursday’s highlights:
* The Dow was pulled lower by AT&T;, down 1 5/8 to a 52-week low of 36 1/4 as investors continued to react negatively to the firm’s choice of an heir apparent to the chairman; and by the index’s three oil stocks, led by Texaco, down 2 7/8 to 100 3/4 after its recent surge, and Exxon, down 1 3/8 to 87 1/4.
Also, Procter & Gamble sank 2 1/4 to 94 despite its report of higher-than-expected quarterly earnings. Investors zeroed-in on P&G;’s disappointing sales in Asia and Latin America, where results were hampered by a stronger dollar.
* Boeing, another Dow component, eased 1 1/2 to 95 1/2 on its earnings report. But conglomerate United Technologies gained 4 1/8 to 127 5/8 on its report.
* Other stocks reacting favorably to earnings reports included Lucent Technologies, the recent AT&T; spinoff, up 1 5/8 to 50; paper company James River, up 3 1/2 to 31 5/8; and Dow Chemical, up 5/8 to 78 5/8.
* Tech stocks continued to gyrate. Computer networker Newbridge Networks sank 2 1/2 to 31 on rumors that its earnings might be below expectations in the current quarter. Other tech losers included Xylan, down 3 to 40 3/4; Hewlett-Packard, down 1 3/8 to 44 7/8; and IBM, down 1 7/8 to 127 3/8.
Computer services firm Electronic Data Systems slipped 3/8 to 48. The stock plummeted Wednesday after the firm warned of slower growth in the current quarter.
* Drug stocks were relatively strong as investors sought out companies with reliable earnings growth. Bristol-Myers Squibb rose 1 to 108 5/8, Schering-Plough gained 3/4 to 66 1/2 and Eli Lilly inched up 1/4 to 71 3/4.
Also, Agouron Pharmaceuticals helped spark a biotech rally after it said it would file for federal approval of its AIDS drug. Agouron gained 4 1/2 to 54 1/4, Biogen leaped 1 3/4 to 82, Cephalon jumped 1 5/16 to 23 9/16, Amgen added 7/8 to 62 1/2 and Regeneron was up 1 to 19 5/8.
* Elsewhere in the health sector, St. Jude Medical surged 4 1/8 to 41 1/2 a day after it agreed to buy defibrillator maker Ventritex in a stock swap valued at about $505 million.
* Republic Industries gained 1 5/8 to 30 5/8 on investor excitement over the opening of the company’s first used-car superstore in Florida.
* Stratosphere, the troubled Las Vegas casino owner, fell 1/8 to 2 after the firm said a bankruptcy filing is likely and that it thus won’t make payments on its debt due Nov. 15.
* In the new-issues market, Wired Ventures, publisher of Wired magazine, delayed its initial stock offering until at least next week. Reuters reported that the company may have to cut the initial offering price to the $8 to $10 range from $12 to $14, to entice investors.
In Mexico, the beleaguered peso weakened for a fifth straight session after attempting to rally at midday. It fell to 7.865 to the dollar from 7.845 on Wednesday on concerns about potential wage and price hikes expected to be agreed upon by the government, business and labor. The peso was at 7.6 to the dollar as recently as mid-October.
