Stocks Fall in Profit-Taking; Dow Loses 73
U.S. stocks eased Tuesday in mild profit-taking after blue-chip indexes zoomed to record highs on Monday.
Meanwhile, crude oil fell almost 3%, and gasoline futures plummeted to a 12-year low, on expectations that OPEC will leave its output targets unchanged rather than make new cuts when it meets in Vienna today.
On Wall Street, the Dow Jones industrials, which soared 214.72 points on Monday to a record 9,374.27, lost 73.12 points to 9,301.15 on Tuesday, ending near the low for the day.
Most broader indexes also fell. The Nasdaq composite gave up 0.6% to 1,965.88. The Russell 2,000 small-stock index eased 0.4%.
But losers had only a modest 16-14 edge over winners on the New York Stock Exchange.
Some analysts said the Dow’s rush to new highs Monday forced some investors to confront big-name stocks’ high price-to-earnings ratios--at a time when corporate profit growth potential for the next year is being questioned.
“Earnings expectations still aren’t good enough” to justify the run-up in stock prices over the last six weeks, said Cummins Catherwood, a money manager at Rutherwood, Brown & Catherwood in Philadelphia. “Cooler heads are prevailing today.”
The market’s bulls dispute the profit worries, arguing that problems related to Asia and other emerging markets will ease in 1999, boosting U.S. companies’ overseas growth.
Some analysts said it was a good sign that profit-taking hit Tuesday.
“Actually, I’m very pleased to see this pullback. The market was getting very frothy,” said Barry Hyman, senior equity analyst at Ehrenkrantz King Nussbaum, citing the buying frenzy in Internet-related stocks.
The bond market didn’t appear to flinch at the government’s report that third-quarter economic growth was even stronger than expected. The yield on the benchmark 30-year Treasury bond slipped to 5.21% from 5.25%.
The Treasury sold new two-year notes at a yield of 4.63%.
In foreign trading, Asian markets were sharply higher Tuesday, with Tokyo’s Nikkei-225 index rising 2.6% to 15,164, the highest since Aug. 21. But profit-taking clipped European and most Latin American markets.
On Wall Street, merger activity continued to surge, with a $4.9-billion deal for Union Camp by International Paper and news that Netscape Communications and America Online had finalized their $4.2-billion deal.
Among Tuesday’s highlights:
* Financial stocks led the retreat after pacing Monday’s rally. American Express fell $4.56 to $104.38 and J.P. Morgan fell $4.63 to $111.25. But Merrill Lynch jumped $2.06 to $78.06.
* Retail stocks were weak. Nordstrom fell $2.13 to $36.81, Sears lost $1.19 to $48.44 and May Department Stores sank $1.69 to $60.69.
* Internet stocks had another wild day. Yahoo sank $11.19 to $210.25 after rising as high as $227.75, and EBay added $3.81 to $196.81 after reaching $234.13.
Broadcom rose $2.75 to $89.38 and Inktomi dropped $8 to $138.13.
Also, Cyberian Outpost rallied for a second day, jumping $12.63 to $37.63 and carrying along rival online retailer Egghead.com, up $4.38 to $18.25. Onsale rocketed $14.88 to $43.88.
* Paper stocks surged on news of the Union Camp buyout. Georgia-Pacific jumped $5.69 to $59.63 and Kimberly Clark rose $1.44 to $52.13.
* Airlines rallied after US Airways announced a $500-million stock buyback. Its stock surged $5.06 to $51.50.
In commodity trading, oil futures fell 33 cents to $12.12 a barrel in New York.
Market Roundup, C11
Gasoline futures dive, C15
