Dow Off 80 in Mixed Session; Bond Yields Rise
Blue chips finally succumbed to profit-taking on Friday, but smaller stocks continued to rebound and posted heady gains for the week.
Meanwhile, long-term Treasury bond yields rose further, as investors moved away from “safe haven” securities.
On Wall Street the Dow Jones industrials closed off 80.85 points, or 1%, at 8,452.29--ending a seven-session winning streak.
Losers topped winners by 17 to 13 on the New York Stock Exchange in relatively slow trading.
But in the Nasdaq market--home to most smaller stocks--winners outnumbered losers by 23 to 17, and the Russell 2,000 index of smaller stocks edged up 0.2%.
For the week the Russell index surged 7.1%, after a 7.7% gain the week before.
The Dow, by contrast, added just 0.4% for the week, after rising 6.6% the week before.
Despite fairly encouraging third-quarter earnings reports from many companies, blue chips have run out of steam as some big investors have stepped away for now, analysts said.
The Dow has resurged 800 points in less than four weeks as global economic worries have receded somewhat--thanks in large part to two interest rate cuts by the Federal Reserve Board.
Now, “money managers are saying, ‘Maybe I can get the stock cheaper. Why not hold off?’ ” said Gary Campbell, chief investment officer at Commerce Bank in Clayton, Mo., which has $8 billion in assets.
Smaller stocks, however, have continued to advance in part because they were beaten down much further in August and September, analysts said.
Even with its rebound the Russell index still is off 25% from its 1998 peak. The Dow, by contrast, is off 9.5% from its peak.
In the bond market long-term T-bond yields rose Friday, with the 30-year yield ending at 5.18%, up from 5.13% on Thursday and 4.98% a week ago.
The T-bond had reached a three-decade low of 4.69% on Oct. 5 amid fear that the global financial system was at serious risk of unraveling amid heavy investment losses by many banks, brokerages and hedge funds.
But with confidence in markets “gradually returning . . . the flight-to-quality trade priced into the market is starting to back out,” said Tad Rivelle, who helps manage about $2.4 billion in bonds at Metropolitan West Asset Management in Los Angeles.
Markets showed little reaction Friday to news that the Japanese government nationalized Long-Term Credit Bank of Japan Ltd., in its first bank takeover since World War II. Japan’s Nikkei stock index eased 1.1% but rose 6.5% for the week.
Among U.S. market highlights:
* The Dow was weighed down by 3M Co., which fell $4 to $77.44 on a disappointing earnings report.
Also weak were American Express, down $1.38 to $87.63; Dupont, down $2.50 to $59.13; and J.P. Morgan, off $2.63 to $93.
* Financial stocks overall were weaker after a sharp rally in recent days. U.S. Bancorp slumped $3.56 to $35.44 after the 14th-largest U.S. bank reported lower-than-expected third-quarter earnings.
Some investors fear banks could be slammed by a weakening economy. Among other financial shares, Mellon Bank lost $1.19 to $58.63, Keycorp dropped $1.44 to $29.56 and Franklin Resources slid $3.13 to $33.25.
* Semiconductor equipment makers soared after BancBoston Robertson Stephens analyst Sue Billat upgraded the industry, saying it “has hit bottom” and is poised to rebound. Applied Materials, the world’s largest chip equipment maker, rose $1.06 to $33.94, KLA-Tencor gained $1.38 to $33.94 and ASM Lithography Holding rose 69 cents to $23.13.
* Among smaller stocks, Gemstar soared $2.88 to $49.38, Entremed jumped $5.25 to $27.81 and Aware Inc. leaped $4.44 to $13. But Pacific Sunwear plunged $5.44 to $20.81.
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Market Roundup, C4
