Dow Slinks From 10K; Saudi News Boosts Oil
Somebody needs to tell the Dow Jones average that it’s heading in the wrong direction.
The blue-chip index fell further from the 10,000 mark Wednesday, weighed down by declines in drug and financial stocks.
The Dow lost 51.06 points, or 0.5%, to 9,879.41, one day after trading briefly above 10,000 for the first time.
Meanwhile, in another milestone of sorts, the market value of America Online topped $100 billion for the first time.
In other markets, oil prices surged after Saudi Arabia, leader of a global campaign to reduce supplies, said it will cut sales to most customers by 12% next month.
Near-term crude oil futures in New York jumped 59 cents to $15.05 a barrel, the highest since early October.
On Wall Street the Dow was hurt as an analyst at SG Cowen warned that drug maker Eli Lilly may face dimmer sales prospects for its flagship Prozac drug.
Lilly tumbled $5.31 to $88.75 and dragged down the two drug stocks in the Dow: Merck, off $1.88 to $84, and Johnson & Johnson, off 31 cents to $89.94.
Profit-taking in recently strong financial stocks also hurt the Dow, with American Express falling $2.63 to $120.94, Citigroup down $1.75 to $62.75 and J.P. Morgan off $2.50 to $121.50.
The broad market also was weak, with losers outnumbering winners by 16 to 14 on the New York Stock Exchange and by 22 to 17 on Nasdaq. Trading was modest.
The Nasdaq composite index lost 0.4% to 2,428.97.
Some analysts said traders were stepping away in advance of Friday’s quarterly expiration of major stock options and futures contracts, which can produce extra volatility. The approach of the expirations “has a tendency to keep a market in a narrower range,” said Peter Cardillo, research chief at Westfalia Investments in New York.
In the bond market, yields edged up for the first time in four sessions, as traders looked ahead to heavy corporate bond offerings in the next week.
The yield on the benchmark 30-year Treasury bond rose to 5.5% from 5.47% Tuesday.
Commodity markets got a boost from oil’s rebound. The Saudi announcement “is a sure sign that [they] are being active in enforcing” an agreement last week by producers to cut world oil supplies by 2.7%, said Victor Yu, an analyst at Refco Inc. in New York. “The bigger the cut in production made by the Saudis, the more credible the agreement is.”
Oil prices also were buoyed by signs that Russia, the world’s third-largest producer, will join in the output-reduction effort. Russian Fuel and Energy Minister Sergei Generalov said Russia will reduce its exports of both oil and oil products, the Russian news agency Interfax reported.
Among Wednesday’s highlights:
* Oil stocks rose with crude prices. Exxon gained $1.25 to $74.38, Atlantic Richfield surged $2.19 to $63.25, Transocean Offshore rose $1.75 to $26.63 and Phillips added $1.19 to $43.81.
* The drug sector was hurt after Stephen Scala, analyst at SG Cowen, said that this year’s sales of Prozac could be $2.93 billion, below an original forecast of $3.05 billion. Scala also said his 1999 per-share earnings estimate of $2.32 for Lilly may be “a couple of pennies too high.”
Lilly said it agreed that Prozac sales growth is slowing because of greater competition but said 1999 earnings still should be within the range of $2.25 to $2.30.
Among other drug shares, Pfizer fell $1.75 to $140.25 and American Home lost $2.19 to $65.81.
* Internet stocks were mixed, but America Online’s gain of $4.13 to a record $109.06 means the firm now is valued at $102 billion. By contrast, General Motors is valued at $58 billion.
* Among Southland issues, Osicom gained $1.19 to $22.25. It said it received a $20-million order for its fiber-optic technology from a phone company, but it declined to name the company.
* In the Dow, AT&T; rose $1.56 to $84 after declaring a 3-for-2 stock split. Caterpillar jumped $3.25 to $47.25 after an upgrade by Salomon Smith Barney.
Market Roundup, C7
