Preelection Nerves Leave Stocks Mixed
The stock market was jittery Monday ahead of today’s elections, with blue-chip shares rallying modestly but smaller issues mostly lower.
Meanwhile, yields eased in the bond market despite the Treasury’s planned sale of $38.5 billion in new notes and bonds this week.
On Wall Street, the Dow Jones industrial average gained 19.75 points to 6,041.68, in what some analysts described as a continuing “flight to quality” by investors who feel compelled to put cash to work in stocks, but who only want to own the biggest, “safest” issues.
In the broad market, winners topped losers by 13 to 11 on the New York Stock Exchange. But in the Nasdaq market of mostly smaller, more speculative stocks, losers had a 21-17 edge over winners, as sellers continued to dominate.
“If you had some money burning a hole in your pocket, you put it in liquid names with a degree of comfort where nobody can yell at you tomorrow,” said Charles G. Crane, director of research at the investment firm Spears, Benzak, Salomon & Farrell.
Investors’ worries about the election center on whether the Republicans will keep control of the House and Senate. Although President Clinton’s reelection is considered a sure thing by most Wall Streeters, they want a Republican Congress in place to block Clinton on many programs that could raise federal spending.
The bond market seems to be taking the election in stride. Yields were slightly lower Monday, with the 30-year Treasury bond yield dipping to 6.65% from Friday’s 6.68%, again nearing a seven-month low.
Traders said confidence is growing that the economy isn’t going to accelerate any time soon and that the Federal Reserve Board won’t raise interest rates between now and year’s end.
That confidence is needed this week: The Treasury will sell new three-year notes today, followed by 10-year notes Wednesday and 30-year bonds Thursday. The total $38.5-billion offering of new debt is known as the quarterly Treasury “refunding,” which raises fresh cash for government coffers.
Among Monday’s highlights:
* Merger announcements stirred trading in some industries. MCI Communications gained 1/2 to 30 3/4 and British Telecom jumped 6 1/8 to 61 5/8 after MCI agreed to be acquired by BT in a $20.8-billion deal. MCI had soared Friday as news of the merger talks leaked out. The stock was then suspended; it resumed trading Monday.
The deal was viewed as bad news for MCI’s long-distance archrival, AT&T;, which slumped 5/8 to 33 3/4 on Monday. Sprint, which had soared 4 1/4 on Friday, gave up 1 5/8 to 41 7/8.
Among other long-distance firms, WorldCom fell 1/4 to 24, but LCI International added 3/8 to 34 3/8 and Frontier gained 3/4 to 30 5/8.
The Baby Bell phone firms were mixed.
* The MCI-BT deal seemed to raise some expectations about deals in the downtrodden cable TV arena as well. Tele-Communications rose 1/4 to 13 1/4 and Cablevision Systems was up 5/8 to 31 1/8.
* Drugstore chain Eckerd zoomed 4 26/64 to 33 18/64 after the weekend announcement that J.C. Penney will buy the firm. Penney lost 1 7/8 to 51 1/8. Among other drugstore chains, Revco jumped 1 1/2 to 31 1/4 and Walgreen rose 1/4 to 38 3/4.
* Conrail fell 1 5/8 to 93 5/8 on news that its rival suitors CSX and Norfolk Southern were holding talks over their competing bids for Conrail, dampening hopes among Conrail owners that a protracted bidding war would emerge. CSX rose 1 7/8 to 44 7/8 and Norfolk gained 1 3/8 to 90 3/4.
* GM surged 1 5/8 to 55 5/8 as workers at a key metal-stamping plant in Indianapolis returned to work after ratifying a deal to end a five-day strike that threatened to paralyze most of GM’s light-truck production. Other blue-chip stocks leading the Dow higher included IBM, up 1 1/4 to 128 3/4, and Caterpillar, up 1 3/8 to 70 7/8.
* Among smaller issues, biotech stocks were hit by profit taking, putting pressure on the Nasdaq index. Amgen lost 1 7/8 to 58 7/8, Biogen dropped 2 5/8 to 72 3/8 and Gilead Sciences fell 1 3/8 to 21 1/2. (Investor Spotlight, D18.)
* Stocks falling on earnings disappointments included engineering firm Foster Wheeler, which sank 4 7/8 to 35 1/8 after warning that its 1997 results will fall short of its 15% annual growth goal.
In commodities trading, lumber prices jumped to the highest level in nearly three years after Canada curtailed exports to the United States to comply with a trade agreement that took effect in April.
November lumber futures jumped $28.50 to $477.50 for 1,000 board feet at the Chicago Mercantile Exchange, capping a rise of $65, or 16%, since Wednesday. It was the highest since the nearby contract reached $488 for 1,000 board feet in December 1993.
With mill shipments disrupted by the quotas, analysts said futures prices look set to rise as high as $500 for 1,000 board feet. The record for CME lumber futures was $493.50, in March 1993.
Overall, however, commodity prices remain depressed. The Commodity Research Bureau index of 17 futures closed at a 1996 low on Monday. (See story, D9.)
Market Roundup, D16
