Dow Falls 19.75 After Late Rally Cuts Losses
Another round of profit taking sent stocks on a second straight drop Wednesday, but leading market averages cut their losses over the last hour as the slide proved too enticing for bargain hunters.
The Dow Jones industrial average fell 19.75 points to 6,422.94 after rebounding from a 75-point deficit over the last hour. On Tuesday, the Dow dropped 79 points as money managers secured big gains from last month’s nearly 500-point advance by the blue-chip barometer.
Broader stock measures also recovered as the session wound down, but the Nasdaq market snapped its streak of seven consecutive record closes as many high-flying technology shares succumbed to the selling pressure.
“When you see issues move up 3 or 4 points a day when they would normally move up three-eighths or a half, you have to expect a blowoff,” said Thom Brown, market strategist for Rutherford, Brown & Catherwood of Philadelphia.
“It’s a healthy correction that’ll get all these excesses out, but I don’t think there’s anything fundamental for investors to worry about,” he said.
After an early extension of late Tuesday’s pullback, Wednesday’s session quickly turned sluggish as bonds traded almost unchanged.
There was little reaction to the published results of a Federal Reserve Board survey that reinforced the widespread notion that the economy is growing moderately with little sign of rising prices. Most analysts say the pace of economic growth has slowed enough to keep inflationary pressures in check without an increase in interest rates by the Fed.
Despite the absence of any alarming news in the Fed report, however, bonds began sliding in the early afternoon amid some profit taking, pulling stocks lower as the yield on the 30-year Treasury bond jumped from Tuesday’s 6.36% to nearly 6.40% before settling at 6.39%.
It took longer than usual by recent standards, but share prices began to rebound late in the session as various blue-chip issues started looking cheap. IBM was down 3 1/2 points at midafternoon, but rebounded to finish at 162, down just 5/8. Procter & Gamble fell 3/8 to close at 104 3/8 after trimming a 2-point loss.
The Standard & Poor’s 500-stock index fell 3.18 points to 745.10, and the NYSE’s composite index fell 1.62 points to 393.23.
The Nasdaq composite index fell 3.35 points to 1,297.02, and the American Stock Exchange’s market value index fell 3.19 points to 588.99.
Among Wednesday’s highlights:
* Continental Airlines Class B shares rose 2 3/8 to 30 3/4 following reports that the Houston-based carrier is discussing a merger with Delta Air Lines, which rose 1/2 to 75 1/2.
* Once again, the Dow’s biggest losers included its best performers during November. United Technologies fell 2 1/4 to 134 1/4.
* Among technology issues, Oracle sank 3 to 46 3/4, Cisco Systems fell 2 1/4 to 63 1/4 and Microsoft fell 1 7/16 to 153 1/4. But Intel jumped 3 5/8 to 129 1/2 on an analyst’s recommendation.
The day’s most active U.S. stock was GT Interactive Software, maker of the Mortal Kombat 3 video game, which plunged 4 3/4 to 7 7/8 after reporting that fourth-quarter sales and earnings will fall below estimates because of sluggish holiday sales.
* Drug companies, among this year’s largest gainers, saw some of the day’s biggest declines. Pfizer slid 1 5/8 to 84, Bristol-Myers Squibb fell 1 7/8 to 113 3/8 and Eli Lilly dropped 1 3/8 to 74 1/2.
* Bond-yield-sensitive financial issues suffered as well. Golden West Financial skidded 1 1/4 to 64 1/8; Household International slumped 1 1/2 to 91 1/2; and Federal National Mortgage Assn., or Fannie Mae, slid 1 1/8 to 38.
Among regional banks, Norwest dropped 1 1/8 to 44 1/4, First Union fell 1 3/4 to 73 1/4 and Comerica declined 3/4 to 55 7/8.
* Auto stocks slid after General Motors said November’s sales fell a combined 12% as factory changes for new models hurt already-weak car sales. Chrysler dropped 5/8 to 35, GM declined 1/8 to 58 1/4 and Ford lost 3/8 to 33.
Overseas, Tokyo’s Nikkei stock average rose 0.1%, Frankfurt’s DAX index fell 0.7% and London’s FTSE-100 fell 0.4%.
Market Roundup, D7
