Dow Drops for 3rd Straight Session; Small Stocks Gain
Blue-chip stocks ended lower in very thin trading Monday ahead of key economic data this week. But smaller stocks were broadly higher.
Meanwhile, bond yields inched up for the fourth consecutive session amid fears of a potential German rate hike, while the dollar rose against the Japanese yen to its highest level in more than two weeks.
In Southeast Asia, stock markets continued to spiral downward on worries over devalued currencies.
On Wall Street, the Dow Jones industrial average ended down 28.34 points at 7,859.57, pulling back after an early rally.
The weakness among blue chips weighed down several other popular stock indexes even though advancing issues outnumbered decliners by 16 to 12 on the New York Stock Exchange.
Smaller stocks’ strength was apparent in the performance of the Russell 2,000 index of smaller shares: It gained 0.6% to 418.09.
The Nasdaq composite index, which includes most small stocks, inched up 0.2% to 1,601.57. It was held back by sluggishness among its blue-chip technology shares.
“Smaller and mid-size companies are starting to move higher, and there’s a logical case for that happening,” said Richard E. Cripps, chief market strategist for Legg Mason of Baltimore. “The big concern with the Coca-Colas and Gillettes is valuation. On a relative basis, [smaller companies] are cheap.”
Early Monday the Dow had been up 56 points at its peak but gave way to late-day profit-taking, sapped by a soft bond market.
It was the third consecutive setback for blue chips and came after the Dow on Friday rallied back from a 177-point deficit to close down only 6 points.
Trading volume, thin on Friday, dropped even more on Monday, to just 392 million shares on the NYSE.
Although the economic calendar is relatively light this week, there was concern about today’s reports on durable-goods orders, existing-home sales and last week’s retail activity.
The pending economic reports weighed on the bond market, where the yield on the 30-year Treasury bond rose to 6.67% from Friday’s close of 6.65%.
Also, fears are rising that the German central bank may boost interest rates soon.
Still, some traders were happy for the relative mildness on Wall Street on Monday.
“It was overdue that we would have a quiet day,” said Robert Freedman, chief investment officer for John Hancock Funds in Boston. “I would guess that this week will be fairly quiet as we approach the [Labor Day] holiday. A lot of people are still away on vacation.” U.S. financial markets will be closed Monday.
Asian investors might also wish for a vacation: Most key markets tumbled again overnight, as Southeast Asian currencies continue to be under attack by speculators.
Thailand’s key market index dove 5.4% to 529.61. Declines were also dramatic in Singapore, Malaysia and Indonesia.
Among Monday’s highlights:
* Consumer-product shares were the Dow’s weakest issues: Procter & Gamble fell $2.25 to $136.25, Coca-Cola fell $1 to $59.69 and Johnson & Johnson fell 94 cents to $57.75.
Meanwhile, General Motors was among the Dow’s strongest components for the second consecutive session, rising $1.38 to $66.19.
* In the technology sector, Intel fell $2 to $94.19 and Microsoft slipped 75 cents to $136.50.
In currency trading, the dollar rose as high as 118.84 Japanese yen amid concern over the persistent weakness of Southeast Asian currencies. It fetched 118.79 yen in New York trading, versus 118.31 yen Friday.
In commodity markets, gasoline prices fell sharply as traders ignored lingering production problems at some refineries and said rising imports could meet any supply shortages at the end of the summer vacation season.
At the New York Mercantile Exchange, unleaded gasoline for September delivery closed 2.98 cents lower at 64.50 cents a gallon. September crude oil slid 44 cents to $19.26 a barrel and September heating oil fell 1.21 cents to 52.20 cents a gallon.
Market Roundup, D12
