Dow Snaps Winning Streak, but Nasdaq Gains
A robust earnings report from Dell Computer lifted the Nasdaq composite index toward record levels Thursday, but the Dow Jones industrial average’s streak of record highs ended as profit-taking finally hit blue chips.
The Dow lost 75.48 points, or 0.9%, to 8,375.58, snapping a six-session string of record highs that had lifted the index 6.9% between year-end and Wednesday.
“Valuations are stretched. This is not the end of the bull market . . . but you need a pullback,” said Larry Rice, chief investment officer at Josephthal & Co.
The broad market was mixed but mostly lower, as losers topped winners by 16 to 13 on the New York Stock Exchange and by a slight margin on Nasdaq.
But the Nasdaq composite rose 11.28 points, or 0.7%, to 1,727.01, powered by gains in Dell and other key technology stocks. The Nasdaq index is within 1% of its record close of 1,745.85 set last fall.
Few traders were surprised by blue chip stocks’ decline, given their recent streak.
“A little bit of profit-taking is highly in order here,” said Ricky Harrington, technical analyst at Interstate/Johnson Lane.
Analysts also warned about possible heightened volatility today because of the “double witching” expiration of certain individual stock option contracts and stock index option contracts.
The stock market didn’t seem terribly upset Thursday by news of the widening U.S. trade deficit. The dollar fell on the news, but modestly, dropping to 126.16 Japanese yen in New York from 126.40 Wednesday.
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The bond market also was largely unmoved by the trade data. The yield on the 30-year Treasury bond edged up to 5.85% from Wednesday’s 5.83%.
In commodities trading, oil prices eased as speculation about possible production cutbacks by the Organization of Petroleum Exporting Countries fizzled by day’s end. Near-term crude oil futures slipped 9 cents to $16.16 a barrel in New York.
Silver prices rebounded from recent heavy losses. Near-term futures rose 26.5 cents to $6.81 an ounce.
Among Thursday’s highlights:
* Dell surged $9.56 to a record $122.75 on its strong earnings report. The computer company also said it expects a “great” 1998.
Other tech gainers included Intel, up $3.63 to $90.56; Sun Microsystems, up $1.63 to $47; Hewlett-Packard, up $1.81 to $64.94; and Xylan, up $2 to $23.44.
Also, America Online jumped $5.13 to $117.63 and ADC Telecommunications gained $2.44 to $25.
* Among blue chips, profit-taking hit American Express, down $1.94 to $86.69; Procter & Gamble, down $1.88 to $82.50; and Merck, down $2 to $122.25.
But Gillette rose $1.94 to a record $106.56 after announcing a 2-for-1 stock split and a 19% dividend increase.
* Southland utility Edison International fell 50 cents to $26.25 despite announcing a 4% increase in its quarterly dividend, from 25 cents a share to 26 cents a share.
* Financial stocks were broadly lower. Tom Brown, a bank analyst at brokerage Donaldson, Lufkin & Jenrette, reiterated his decision to downgrade bank stocks. He cited the likelihood of loan losses at large banks because of Asia’s crisis, and the costs related to fixing computers to allow them to read dates after 1999.
J.P. Morgan, which is attempting to collect $480 million from South Korean financial institutions it said failed to make good on derivatives losses, sank $1.81 to $111.31. Other bank losers included Chase Manhattan, down $2.19 to $119.63; BankAmerica, down $1.38 to $73.13; and Wells Fargo, down $9.56 to $313.50.
* Energy stocks continued to seesaw with oil prices. Mobil lost 81 cents to $71, Occidental Petroleum fell $1 to $25.13 and USX-Marathon fell $1.06 to $32.25.
* Calgon Carbon surged $2.56 to $13.56 after the company said its chief executive resigned and that the firm may put itself up for sale amid a rapid consolidation of the water-treatment industry.
In foreign trading, South Korea’s main market index jumped 5.3% to 513.45. Standard & Poor’s Corp. raised Korea’s foreign currency debt rating three notches to “BB+”, reflecting progress in implementing reforms on labor flexibility, corporate restructuring, foreign ownership and bankruptcies.
Most European stock markets pulled back from Wednesday’s record highs. Germany’s main index fell 1%.
Market Roundup, D6
