FINANCIAL MARKETS : Blue Chips Stumble on Profit Taking
Blue-chip stocks fell on profit taking and higher bond yields Friday, ending the Dow index’s five-day run in record territory.
The Nasdaq composite index, however, edged up to a record closing high.
“We’ve just got some normal profit taking in a bull market,†said Alfred Goldman, technical research director at A.G. Edwards. “I’m impressed we don’t have a more severe drop.â€
The Dow Jones industrial average fell 31.07 points to 5,373.99. The Dow skyrocketed more than 100 points this week, topping 5,300, then 5,400 for the first time.
In the broader market, declining issues beat advancers 1,262 to 1,027 on active volume of 418 million shares on the New York Stock Exchange.
The Nasdaq composite index rose 2.65 points to 1,072.11, topping the previous record of 1,069.79, set Dec. 4.
The Standard & Poor’s composite index of 500 stocks slipped 2.61 points to 635.85. It had achieved its fourth straight record close on Thursday.
Stocks were depressed by the bond market, which tumbled on jitters about the Treasury’s quarterly auction next week of $44.5 billion in securities to fund government operations.
The bond market also overlooked the loss of 201,000 nonfarm jobs in January to focus on the report’s 0.5% rise in hourly earnings, suggesting that inflation may be on the rise.
The benchmark 30-year Treasury bond yield rose to 6.16% from 6.07% at Thursday’s close.
Michael LaTronica, a director of research at Gruntal & Co., predicted that supply concerns will cast a shadow over bonds for the week, “and then we’ll come rallying back when we conclude we’ll get another rate cut by mid-year.
“Stocks will be bumpy with bonds, and then we’ll have the final charter on fourth-quarter earnings and I think we’ll be fine. I get nervous when the market goes straight up.â€
Analysts did not see the recent spike in gold prices as a warning of inflation on the horizon.
“I don’t think gold is a good barometer of inflation. It’s a tightly controlled market, and we’re seeing a modest increase in fundamental demand,†LaTronica said, adding that the rise “is related more to a hedge against [geopolitical] uncertainty and less of a hedge against inflation.â€
Among gold stocks, Homestake Mining rose 3/8 to 20, Barrick Gold was up 3/4 to 31 5/8, Newmont Gold gained 1 to 59 1/2 and Newmont Mining rose 1 1/8 to to 59 1/8.
Among market highlights:
* Baxter International lost 2 1/2 to 42 1/2, and W.R. Grace surged 7 3/8 to 69 1/4. Baxter said it offered to buy Grace’s National Medical Care unit in a tax-free transaction valued at $3.8 billion, but Grace rebuffed the offer.
* Apple Computer rose 7/8 to 29 1/4. Apple announced after the markets closed that Chief Executive Michael Spindler had been ousted and will be succeeded by National Semiconductor CEO Gilbert F. Amelio. Apple declined comment. National Semi slipped 1/8 to 17 5/8.
* Some analysts said a management reshuffling at Apple dimmed chances of a merger with Sun Microsystems, which rose 1 1/2 to 47 3/8.
* Hasbro tumbled 6 1/8 to 34 5/8 after Mattel withdrew its merger offer. Mattel rose 1 1/8 to 33 5/8. * Congress’ passing the landmark telecommunications reform bill sparked buying in some shares of Baby Bell and equipment companies. Ameritech added 3/8 to 60 1/4 and Bell Atlantic rose 1/8 to 69 1/8. Those who face more competition in the long-distance business fell. AT&T; was off 1 5/8 to 64 3/4; MCI, off 1 1/8 to 28; and Sprint, 1/8 to 42 3/4.
Wheat prices rose Friday on rumors that Russia may make a large purchase of U.S. wheat. There was also concern that frigid temperatures in the Great Plains will damage crops needed to replenish depleted grain stocks.
At the Chicago Board of Trade, rumors were circulating that Russia was about to buy 2.5 million metric tons of the grain, although a spokesman for Russian Agriculture Minister Alexander Zaveryukha denied the rumor.
Analysts said any wheat production shortfall would have an exaggerated effect on the market because of strong global demand for the grain. Stocks of wheat at the end of May are projected at 386 million bushels, down nearly 25% from a year ago.
“Wheat was again the dominant factor. Russian rumors and cold weather are the bottom line,†said Mark Cermak of O’Connor & Co.
March wheat rose 9 cents to $5.26 1/2 a bushel. March corn edged up 0.25 cent to $3.66 3/4. March soybeans fell 1.75 cents to $7.39 1/4 a bushel.
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