Overseas Spiral a Factor in Dow Falling 22.36 : Market Overview
Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:
* Stocks declined broadly, pressured by big losses in key overseas markets, rising interest rates and continued profit taking. The Dow Jones industrial average shed 22.36 points to 3,208.63.
* Bond yields rose after President Bush commented that interest rates seem manageable at current levels--suggesting that the White House will no longer pressure the Federal Reserve to cut rates.
Stocks
Stocks were poised for a decline at the opening after a poor showing in foreign markets.
In Tokyo, for example, the Nikkei stock index tumbled 262.45 points, or 1.3%, to 20,592.14--coming closer to the critical 20,000 level.
Also, President Bush hurt market sentiment when he commented that he is more concerned with economic growth than about long-term Treasury bond yields nearing the 8% level again.
“I am much more concerned about stimulating the economy today than I am about long-term rates. They are manageable at this juncture,” he said.
Many investors, still confused about the economy and wary of rising interest rates, decided that the safest decision was to sell--the prevailing mood since March began. Wednesday’s losses were widespread, with declining stocks topping winners 11 to 5 on the New York Stock Exchange.
Big Board volume came to 186.38 million shares, down from Tuesday’s 203.0 million.
Many analysts believe that the market could be in for a prolonged period of profit taking after the big December and January rallies. Continued weakness in Tokyo stocks--and sudden declines in some European markets--are taking a toll on investors’ spirits worldwide, experts say.
“There is very little here in terms of encouragement,” said analyst Joseph Barthel at Fahnestock & Co. “We are locked in a correction, and the easier path has been down.”
In London, the Financial Times 100-share average plunged 52.4 points, or more than 2%, to 2,522.4, as investors expressed disappointment with Britain’s budget and fears about the general election to be held April 9.
In Paris, the CAC-40 index followed London stocks lower, falling 25.86 points, or 1.3%, to 1,968.02. Frankfurt stocks also eased, the DAX average losing 7.12 points to 1,743.42.
Among U.S. market highlights:
* One sign of the breadth of selling was that only one of the stocks in the Dow 30 index gained: McDonald’s, up 1 5/8 to 41 5/8 after brokerage Smith Barney upgraded the stock to buy , citing renewed growth.
* Most classic growth stocks were again targeted for profit taking. Retailer Gap slid 2 1/4 to 42 7/8, drug firm Merck fell 1 3/4 to 150 3/8, Schering-Plough lost 1 5/8 to 56 7/8, General Mills gave up 1 1/8 to 66 1/4, Quaker Oats dropped 2 1/8 to 60 1/4, and Carnival Cruise Lines fell 1 5/8 to 32 1/8.
* Industrial stocks were also hit. Cummins fell 2 3/4 to 60, Emerson Electric lost 1 to 51 3/8, Black & Decker sank 1 5/8 to 24 1/4, and Owens-Corning sank 7/8 to 36 1/2.
* Computer-related stocks dropped sharply. Intel gave up 2 to 62 1/2, Compaq lost 1 5/8 to 27 1/2, Novell slid 1 7/8 to 57 1/4, Quarterdeck eased 1 1/4 to 19 1/4, and Motorola fell 1 5/8 to 73 5/8.
* Among the few bright spots, San Diego-based biotech firm Agouron Pharmaceuticals soared 2 1/2 to 16 3/4 after reporting progress in designing a synthetic drug that blocks a key enzyme involved in the proliferation of tumor cells.
* Fullerton-based Day Runner, which makes personal organizers, went public at 15 a share on the NASDAQ market and closed at 17 3/4.
* Southland home builder Kaufman & Broad eased 3/4 to 20 7/8 despite being added to PaineWebber’s “Focus List” of stocks to buy.
* Another L.A. firm, aerospace company Whittaker, gained 1 to 12 5/8. The company’s CEO told analysts in New York that earnings in the current quarter will be above year-ago levels.
Credit
Bush’s comments about interest rates being “manageable” at current levels sparked selling of bonds. The price of the key 30-year bond fell 21/32 point, or $6.56 per $1,000, sending its yield up to 7.95% from 7.90% Tuesday.
Investors took Bush’s comments to mean that the Federal Reserve is off the hook in terms of further interest rate cuts--though many experts still doubt that’s the case.
Though long-term rates rose, short-term Treasury bill rates declined slightly.
The fed funds rate, the rate on overnight loans between banks, held at 3.75%.
Currency
The dollar was mostly lower against other currencies after the Swiss and Japanese central banks entered the market.
Analysts said the dollar ran into resistance after the Swiss National Bank intervened to support the weakening franc and the German mark. Traders used the intervention as an excuse to liquidate large dollar holdings.
The Swiss bank’s actions worked, as the dollar fell to 1.508 Swiss francs in New York from 1.517 Tuesday.
It fell to 1.664 German marks from 1.671 Tuesday. But the dollar rose against the Japanese yen, gaining to 133.40 yen from 132.90.
Commodities
Coffee futures prices rallied strongly after exporters in Brazil, the largest coffee-growing country, agreed on the need for a price-support scheme.
On other commodity markets, grains and soybeans were mixed; livestock and meat futures fell; energy futures were mostly lower; and precious metals advanced.
Unroasted coffee beans for March surged 2.40 cents to 72.25 cents a pound on New York’s Coffee, Sugar & Cocoa Exchange.
Meanwhile, light, sweet crude oil for April fell 19 cents to $18.50 a barrel on the New York Merc.
On New York’s Comex, March gold rose $1.70 to $350.70 an ounce. Silver rose 0.3 cent to $4.15.
Market Roundup, D6
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