Dow Ends Its Winning Streak With Small Dip
Blue-chip stocks halted a 10-session winning streak Monday as the Dow Jones industrials eased 1.12 points to 6,346.91.
The stock market overall also closed mostly lower in lackluster trading, as investors appeared to step back and catch their breath.
The Dow had rocketed 325 points, or 5.4%, in the 10 sessions through Friday, as investors celebrated the continuing power split in Washington after the Nov. 5 elections and a fresh decline in long-term bond yields to eight-month lows.
“How long can you celebrate the election? You need some positive events to drive the market” further, argued Robert Froehlich, chief investment strategist at Van Kampen American Capital in Oakbrook Terrace, Ill.
Some analysts were much harsher in their assessment of the recent rally in blue-chip issues to record highs. “If there has been any point since this cycle began in the early ‘90s where there was overvaluation [in stocks], it is now,” said Timothy Morris, chief investment officer at Bessemer Trust Co. in New York.
The Dow is up 24% year-to-date, after surging 33.5% in 1995.
On Monday, the Dow bounced around for much of the day, briefly trading over 6,370 before sliding in the final hour.
The index was weighed down by Texaco, which fell 2 3/4 to 98 3/8 as investors reacted to the oil company’s settlement late Friday of a race-discrimination lawsuit. The settlement included a $115-million cash payment and $26.1 million in pay raises over five years for black employees.
IBM continued to advance, rising 1 3/4 to 146 3/4 after trading as high as 150. Brokerage Morgan Stanley & Co. raised its 12-month target price for the computer giant to $170 a share, from $145. The shares had surged 8 1/8 on Friday.
In the broad market, losing stocks edged winners on the New York Stock Exchange. Losers had a much more significant edge over winners on the Nasdaq market of mostly smaller stocks, although price changes were muted. The Russell 2,000 index of smaller issues lost 0.58 point to 345.94.
In the bond market, yields ended slightly higher or unchanged. The 30-year Treasury bond yield held at 6.46%, same as Friday. Long-term yields have slid recently as investors have focused on signs that the U.S. economy is slowing.
The bond market faces a test today and Wednesday, as the Treasury auctions new two- and five-year notes, respectively.
Among Monday’s highlights:
* Deutsche Telekom, the German phone monopoly, went public in Germany and on the NYSE at the same time, with the NYSE-traded shares jumping 2 39/64 to 21 1/2 in heavy trading. But Germany’s key stock index, the DAX, declined anyway, losing 31.96 points, or 1.1%, to 2,763.84.
* Defense issues were active. McDonnell Douglas slumped 4 1/4 to 52 1/2, with several brokerages downgrading the stock after the Pentagon’s selection of Boeing and Lockheed Martin as finalists in the design of a new fighter jet. Boeing rose 1 1/2 to 93 1/4 and Lockheed jumped 1 7/8 to 95 5/8.
* Airline shares gained after USAir’s largest shareholder, Tiger Management, gave an upbeat assessment of the airline industry in Barron’s magazine. USAir gained 1 7/8 to 22 3/8, Delta jumped 2 5/8 to 77 1/2 and Southwest rose 3/4 to 24 5/8.
* Most tech shares were marginally lower, but Microsoft rose 1 3/8 to 150 3/8 after the company said it is willing to spend more than $1 billion during the next three years on its Internet and news services.
* Irvine-based Cortex Pharmaceuticals surged 2 1/8 to 5. It said studies found that its Ampalex drug could affect cells associated with the formation of memory.
* Shares of Pacific Rehabilitation & Sports Medicine rose 9/16 to 6 1/16 after Horizon/CMS Healthcare agreed to acquire the physical therapy services firm for $56 million. Horizon rose 1/4 to 10 3/4.
Market Roundup, D15
