Stocks’ Rally Pauses; Gold at 20-Month Low
The concept of profit-taking finally took hold among some blue-chip stock investors on Thursday, as Wall Street’s incredible hot streak paused.
The Dow Jones industrial average slipped 11.55 points to 6,418.47, only the second time in 14 sessions that it has lost ground.
The stock market overall also was broadly lower, though only modestly. The New York Stock Exchange composite index was off 0.55 point to 392.25.
“It’s a pause which everyone was expecting. . . . It’s healthy for the market to go sideways and consolidate after such a nice move,” said Robert Freedman, chief investment officer for John Hancock Funds in Boston.
Meanwhile, in other markets, gold fell to its lowest price in 20 months as inflationary expectations continued to wane. Bond yields edged up slightly from Wednesday’s eight-month lows.
On Wall Street stocks’ pullback was led by technology issues, which have been the market’s recent stars. Temporary-help firms also were sharply lower after Olsten, one of the industry’s leading companies, warned of weaker-than-expected earnings.
But there were few other discernible trends in trading. Many analysts say stock and bond markets need some sort of significant news to move them--either up or down--from current levels.
For now, investors seem content with forecasts for continued moderate economic growth and low inflation in 1997, an outlook that remains friendly to stocks and bonds.”The Goldilocks economy--not too hot, not too cold--is holding and inflation continues to be in check,” said Larry Pavelec, who helps manage $8.5 billion at Milwaukee-based M & I Investment Management.
Indeed, in a strong sign that inflationary expectations continue to decline, December gold futures on the New York Comex fell $2.50 to $376.50 an ounce on Thursday, the lowest price in 20 months.
“Gold is continuing to erode away in a very slow but steady fashion, with most bullion dealers looking for [a spot price of] $370” before the year ends, said Merrill Lynch analyst Ted Arnold.
The only major economic news Thursday was the government’s report that the number of American workers filing first-time claims for jobless benefits unexpectedly shot up by 17,000 last week to 344,000, the highest since July. Many analysts had expected a much smaller increase in the report, which reinforced a stream of other recent data suggesting that slowing economic growth has helped contain inflationary threats.
The 30-year Treasury bond yield initially fell to 6.38%, but ended the day at 6.41%, up from 6.40% Wednesday.
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There was a bit more excitement in the global bond market: Russia made a dramatic re-entry to the international capital markets with the sale of $1 billion of Eurobonds, its first Eurobond since the break-up of the Soviet Union.
The five-year notes carried an annual coupon of 9.25%, or about 3.30 points above what the U.S. Treasury pays on its five-year notes. The deal was considered a big success for the Russians, and opens the gate for billions of dollars in planned Russian Eurobond sales next year, from city governments and corporations as well as from the federal government.
Back on Wall Street, although U.S. stock prices don’t appear to be on the verge of crumbling anytime soon, many bearish traders seem to think otherwise: The New York Stock Exchange reported Thursday that “short interest”--representing bets on lower prices--this month took one of its biggest jumps in recent memory. (Investor Spotlight, D6.)
Among Thursday’s highlights:
* Tech stocks losing ground included Intel, down 2 to 118 7/8; Compaq, off 1 to 79 3/8; Microsoft, off 2 7/8 to 150 3/8; Parametric Technology, down 1 1/8 to 49 3/4; and Seagate, down 1 3/4 to 76.
But IBM, a driving force in the Dow index’s recent surge, added 1 1/2 to 154 1/8.
* Temporary-help provider Olsten plunged 5 3/8 to 14 1/2 after it warned that its margins are being squeezed in both the general staffing services business and the home health care services business. Analysts said one problem many temp firms are facing is a tight labor force, making it harder to find good temps at reasonable wages.
Other temp firms sliding included Manpower, down 3/4 to 31 1/8; AccuStaff, off 2 1/4 to 21 1/4; Interim Services, down 3 1/8 to 36; and Robert Half International, which slid 2 3/8 to 35 7/8.
* Among blue chips, Coca-Cola lost 1 to 50 5/8 after some comments Wednesday by Chairman Robert Goizueta sparked fears the soda maker wouldn’t meet earnings expectations. Coke quickly emphasized that the comments weren’t meant as a forecast.
Boeing, benefiting from news that American Airlines will buy 103 Boeing jets, rose 1 1/8 to 97 1/2.
* Woodland Hills-based Panavision, a designer and maker of high-precision film camera systems, got a rousing welcome as it went public. Its shares, offered at 17, jumped 3 to 20 on the NYSE.
* Some health-care shares rallied. Bausch & Lomb rose 2 1/4 to 35 1/2 on speculation that the company could be the target of a $48-a-share bid from Johnson & Johnson, which gained 3/4 to 52 1/8.
* Marvel Entertainment fell 3/8 to 2 1/2. Bondholders said they were told by Marvel’s biggest shareholder that the company will run out of cash in three weeks and needs $15 million immediately to pay its bills.
* Southland-based hazardous-waste disposal firm International Technology lost 7/8 to 9 1/8 on the stock’s first trading day following a 1-for-4 reverse stock split.
In futures trading, natural gas for December delivery rose above $4 for each million British thermal units for the first time since the futures began trading on the Merc in April, 1990. Prices later settled up 12.3 cents, at $3.75.
