Stocks Close Mixed; Dow Off 25.91
NEW YORK (AP) _ The Dow Jones industrials ended in the minus column today, but not before mounting a dramatic rescue effort that took the blue-chip index up as much as 20 points in the final hour of trading.
The Dow Jones industrial average ended down 25.91 points at 8,846.89.
The Dow got as low as 8,820.99, down nearly 52 points, this morning, after a government report indicated that corporate profits fell in last year’s final quarter.
Traders briefly took the blue-chip index 20 points into positive territory late in the session, to 8,892.98, but they couldn’t hold it there.
Declining issues outnumbered advancers by 1,506 to 1,488 on the New York Stock Exchange, with 510 unchanged.
NYSE volume totaled 598.43 million shares as of 4 p.m., vs. 663.13 million in the previous session.
The Standard & Poor’s 500-stock list rose 3.45 to 1,105.37, and the NYSE composite index fell 0.55 to 572.21.
The Nasdaq composite index rose 3.92 to 1,828.43, and the American Stock Exchange composite index rose 2.50 to 739.39.
Investors seemed almost relieved to see the rip-roaring stock market slow down just a bit.
``I think today’s market could be characterized as just a simple, small retracement,″ said Ned Riley, chief investment officer at BankBoston, ``a very good consolidation considering the substantial appreciation that’s been realized since the beginning of the year, and in 1997 and 1996.″
Stocks started lower after the Commerce Department said after-tax corporate profits slipped 2.3 percent in the final three months of last year, the worst drop since the first quarter of 1994 and the first decline since the the third quarter of 1996.
Traders and analysts conceded that that was old news. But they said nervous investors were cashing in on the gains they have made since the beginning of the year, on the premise that first-quarter profits, which companies will begin to report in a few weeks, will be weak as well.
Also this morning, Commerce said that despite the drop in profitability, the nation’s economy grew at a brisk 3.7 percent annual pace in the fourth quarter.
Peter Canelo, market strategist at Morgan Stanley, Dean Witter Reynolds, said he was unfazed by today’s earlier pull-back and looks for the Dow to hit between 9,200 and 9,300 within six months.
Canelo noted that money supply is accellerating, ``and that’s very positive for both earnings and the economy over the next six months.″
That might prompt the Federal Reserve to raise interest rates, Canelo said. But to do any meaningful damage to the stock market, long-term bond yields, which are currently trading below 6 percent, would have to climb to between 6.25 percent to 6.50 percent.
In addition, Canelo said, commodity prices are low, despite a recent firming in oil prices, and the dollar is still rising, which keeps import prices down and caps domestic inflation.
Among Dow components, McDonald’s shares rose more than a point, after the company announced a new strategy aimed at improving profitability, including capping U.S. spending. McDonald’s said it will take a second-quarter charge of between $170 million and $190 million to pay for the plan.
Firmer oil prices pulled oil-related stocks higher but pressured shares of transportation companies, which are heavy consumers of oil, lower.
Tobacco stocks fell as a Senate committee mulled compromise legislation that would raise cigarette prices $1.10 a pack over five years while capping the industry’s legal costs.
Intel Corp. rose more than a point in leading volume in Nasdaq trading. The microprocessor maker said Andrew Grove will resign May 20 as chief executive. He will be succeeded by Craig Barrett, the company’s president. Intel also boosted its stock repurchase program by 100 million shares.