Profit-Takers Clip 77 Off Dow; Dollar Rockets
Blue-chip stocks Monday pulled back for the first time in nearly two weeks, as some investors took profits from the market’s spectacular recent run-up.
Meanwhile, in currency trading, the dollar rose sharply against the Japanese yen and also gained against other key currencies, as some traders bet that the Federal Reserve Board will hold short-term interest rates steady next week rather than cut them.
But in the Treasury bond market, yields fell, after surging in recent weeks.
On Wall Street, the Dow Jones industrial average lost 77.50 points, or 0.9%, to 8,897.96, led lower by financial stocks.
The Dow edged within 15 points of 9,000 just after trading opened, but then fell as much as 130 points before cutting its losses in the afternoon.
Most broad-market indexes also gave back some of last week’s gains, which had pushed the market to its highest level since late July. Losers outnumbered winners by 19 to 11 on the New York Stock Exchange, though in relatively slow trading of 593 million shares.
The Nasdaq composite index edged up 4.49 points to 1,861.05, boosted by some big tech issues and by another buying mania in some Internet stocks.
Monday was just the fifth losing session since the market turnaround began a month ago.
The magnitude of the market’s recovery has led to renewed worry about whether share prices overstate U.S. companies’ earnings prospects for 1999.
Moreover, much of the optimism that has fueled stocks’ rebound has been based on expectations of additional interest rate cuts by the Fed.
But the dollar’s strength Monday suggested that some currency traders believe the Fed won’t cut rates again when it meets Nov. 17. If U.S. rates remain relatively high, that could bolster the dollar by attracting more foreign money to dollar-denominated bonds and other assets.
The dollar Monday made its biggest gain in nine weeks against the yen, rising to 121.57 yen from 119.10 on Friday, and it climbed to a six-week high against the German mark.
“It is not written in stone that interest rates have to come down” at the Fed meeting next week, said Marshall Acuff, an equity strategist at Salomon Smith Barney.
The 30-year Treasury bond yield, which on Friday hit a two-month high of 5.38%, fell to 5.29% on Monday.
At current levels, “I would be disinclined to sell Treasuries and more inclined to buy them,” said William H. Gross, who oversees about $137 billion in bonds at Pacific Investment Management Co. in Newport Beach.
As for stocks, “the rebound has been so strong that we may be a bit overbought, but it’s such a traditionally strong time going into November, December and January that I wouldn’t bet against further upside,” said Barbara Marcin, senior portfolio manager at Citibank Global Asset Management.
Among Monday’s highlights:
* Financial stocks hit by profit-taking included J.P. Morgan, down $4 to $99.75; American Express, off $2.44 to $94.88; and Citigroup, down $1.25 to $44.88.
Among other issues, Bank One dropped $2.13 to $51.81, Chase Manhattan slid $2.69 to $58.31 and BankAmerica dropped $2.31 to $60.13.
* Energy stocks also were weak, with Mobil off $1.38 to $73.13 and Halliburton down $2.31 to $36.19.
* In the tech arena, IBM rose $1.44 to a record $151.38 as the Dow’s strongest component, while Dell Computer gained $3.31 to $69 and Microsoft advanced $1.38 to $110.69.
Internet stocks also bolstered the tech group, with America Online rising $4.75 to $144.75 and Excite up $7.50 to $47.50.
Yahoo, the No. 1 Internet directory firm, surged $11.19 to a record $164.75.
* Some retailers advanced. Venator soared $2.06 to $12.31, Abercrombie & Fitch rose $1.31 to $48.31 and Guitar Center surged $1.44 to $17.94.
Market Roundup, C14
