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Stocks Close Mixed Ahead of Budget Vote : Market Overview

August 06, 1993|From Times Staff and Wire Reports

Caution ahead of congressional action on President Clinton's budget plan left stocks mixed Thursday. Blue chips eased while smaller stocks hit new highs.

* Interest rates fell as gold and other commodities plunged, calming inflation worries.

Stocks

Wall Street churned, leading up to the House vote late Thursday on the Clinton budget plan.

"People just want to keep their positions flat until they see what the outcome (in Congress) is," said Marshall Acuff, portfolio strategist at Smith Barney Shearson.

The Dow Jones industrials slipped 3.08 points to 3,548.97, as losers topped winners 10 to 9 on the New York Stock Exchange.

But in the NASDAQ market of mostly smaller stocks, winners and losers were almost dead even. And the NASDAQ composite index rose 1.71 points to 715.50, a new record.

The market seemed curiously unaffected by the selloff in gold prices, which saw the metal lose $22 an ounce.

Analysts said many investors still are sorting out their view of the stock market in light of the Clinton budget plan. While the tax increases in the program are expected to slow the economy, the plan also promises lower interest rates, which are inherently good for stocks.

Among the market highlights:

* Gold-mining stocks dominated the losers' list as profit-takers swarmed. The gold stocks had been the market's hottest industry sector this year, up 77% on average through July.

Among the losers, American Barrick sank 2 3/8 to 24 1/4, Placer Dome tumbled 1 3/4 to 19 1/4, Hemlo Gold dropped 1 5/8 to 8 7/8, ASA Ltd. gave up 2 3/8 to 44 3/8 and Pegasus Gold lost 2 3/4 to 23 7/8.

* Other metals stocks also were hurt. Reynolds Metals fell 1 5/8 to 49 5/8, Alcoa lost 3/4 to 72 1/2, Amax eased 3/8 to 24 3/4 and Phelps Dodge was off 5/8 to 46.

* Airline stocks fell after Delta slashed domestic fares for the fall in what could be the first step in a wave of price cuts in the industry.

Delta lost 7/8 to 49 1/2, USAir gave up 1/2 to 16 5/8, United Airlines parent UAL fell 2 5/8 to 142 and American Airlines parent AMR slumped 1 7/8 to 63 1/8.

* Drug stocks turned in another lousy day. Warner-Lambert fell 1 1/2 to 65 1/2, Pfizer lost 1 to 58 7/8 and Schering-Plough sank 1 7/8 to 60 1/8.

* On the upside, many technology rallied, which helped the NASDAQ market. PowerSoft jumped 2 1/2 to 28 3/4, Oracle gained 1 1/8 to 53 1/8, Advanced Micro Devices rose 1 1/8 to 27, Microsoft surged 1 3/4 to 74 3/4 and Adobe Systems added 1 to 53 5/8.

* Some emerging growth stocks also found buyers. Some traders speculated that true growth stocks could be helped if the Clinton plan slows the economy, because investors will place more of a premium on companies that can boost earnings in a weak environment.

Among growth issues, global news service Reuters zoomed 2 1/2 to 70 1/8, golf club maker Callaway Golf jumped 2 7/8 to 49 3/8, restaurant chain Lone Star Steakhouse surged 1 5/8 to 20 3/4 and cable TV equipment maker General Instrument leaped 1 3/4 to 47 3/4.

* Among Southland issues, Herbalife tumbled 2 5/8 to 14 after the dietary supplements company filed for a new stock offering. Its chief executive plans to sell 1.7 million shares of his stock.

Overseas, stocks were mixed. In Frankfurt, the DAX index added 0.14 point higher at 1,860.70. In London, the FTSE-100 index inched up 2.1 points to 2,943.4.

In Tokyo, the Nikkei average slid 71.91 points to 20,425.64.

Credit

Interest rates fell broadly, helped by the sharp decline in commodity prices.

The yield on the Treasury's main 30-year bond eased to 6.52%, from Wednesday's 6.54%, nearing the record low of 6.51% reached Tuesday. Shorter-term bond yields also were lower.

Analysts noted that worries about inflation faded somewhat Thursday with the selloff in key commodities, many of which have rocketed in recent months.

Gold and other precious metals led the commodity decline, but it was broad-based. Gold for current delivery slumped $22 to $377.20 an ounce and silver plunged 47.9 cents to $4.77.

Also falling were soybeans, crude oil, cotton, wheat and oats, among others. The Commodity Research Bureau index of 21 key commodities dropped 3.76 points or 1.7% to 217.71.

Kathleen Stephansen, economist at Donaldson, Lufkin & Jenrette Securities, said the likelihood that Clinton's budget would be approved by Congress also was seen as a positive for bonds. The bill's provisions are expected to cut the federal deficit, which would mean less government borrowing and a smaller supply of bonds.

In addition, the tax hikes in the budget are expected to slow the economy, further taking pressure off interest rates.

Currency

The dollar sank to a new postwar low against the Japanese yen as U.S.-Japan trade tensions showed no signs of letting up under a new Japanese government.

The dollar plunged to a record 103.90 yen late in New York, before rising at the close to 104.05.

Traders believe a strong yen is the only way to slash Japan's trade surplus. "The new (Japanese) government is not going to get a new trade agreement" with the U.S., said Earl Johnson, analyst at Harris Bank, pointing to Japan's shaky new leadership.

Many dealers believe the dollar will soon fall to 100 yen.

Elsewhere, the dollar rose to 1.711 German marks, up from 1.708 Wednesday.

Meanwhile, the U.S. dollar hit a five-year high against the Canadian dollar. One U.S. dollar bought $1.29 Canadian at the close of trading.

Market Roundup, D6

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