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FINANCIAL MARKETS

Gold Drops Amid Lure of Rising Stocks

February 13, 1996|From Times Wire Services

Most broad-market indexes hit new records Monday, joining the Dow Jones industrials in entering a fourth week of their strong rally.

But the gold market was hit by waves of selling from investors lured away by the soaring stock market. Prices relinquished half of their new year's gains.

April gold dropped $4.50 to $403.30 an ounce after falling to $402.10, the lowest for a most-active contract since Jan. 24 at New York's Comex.

The Dow industrial average gained 58.53 points to 5,600.15, its first close above 5,600 and its 13th record in 16 sessions. The well-known barometer of blue-chip companies, which already has risen almost 500 points this year, was up nearly 75 points at one time Monday.

The NYSE composite index rose 2.26 points to 351.70; the Standard & Poor's 500-stock index rose 5.08 points to 661.45; and the Nasdaq composite index gained 0.78 point to 1095.38--all new marks--but the American Stock Exchange's market value index fell 1.55 points to 562.46.

Most markets worldwide were fairly sedate Monday. The yield of the benchmark 30-year Treasury bond fell to 6.03% from 6.09% late Friday.

On the New York Stock Exchange, advancing issues outnumbered decliners by about 8 to 7 where volume totaled 397.84 million shares as of 4 p.m., down from Friday's busy pace.

Traders and analysts have said the market owes much of its strength to record flows of cash into stock mutual funds.

The difficulty of trying to stay in the game but predict when the market's momentum will ebb has forced investors and money managers to make more aggressive plays, said Joe Battipaglia, market strategist at Gruntal & Co.

"Everyone's aware of the underlying positives: low inflation, falling interest rates, decent confidence," Battipaglia said. "Investors have concluded that they need to be in financial assets."

But if money managers start to lock in profits, he cautioned: "A lot of air could come out of these valuations quickly."

William Dodge, market strategist at Dean Witter Reynolds Inc., said the market's rise is "'more methodical than maniacal, but we're probably approaching a limit."

Among market highlights:

* TRW stock rose 5 1/4 to 90 3/8 as the stock market got its first chance to react to news that the company would sell its credit-reporting business for $1 billion and buy back up to 15% of TRW stock.

* AT&T, a Dow industrial component, rose 1 point to 67 1/2 after reports that it is talking with MCI about joining forces to create local telephone networks in major U.S. markets. MCI, which confirmed the reports of preliminary negotiations, rose 1 5/8 points to 30 1/2 on Nasdaq.

* Department 56 tumbled 15 5/8 points to 22 3/8 after it reported fourth-quarter earnings that were at the bottom of analysts' estimates and said first-quarter orders would be down about 10% from a year ago.

* Kenneth Cole lost 4 3/8 points to 12 7/8 after warning that its fourth-quarter earnings would fall below Wall Street's estimates.

* Physician Support Systems, which provides business management services to hospital-affiliated physicians, rose 3 points to 15 in its first day of trading.

* Oil stocks were among the biggest gainers as crude oil prices rose. Mobil surged 2 1/4 points to 115 5/8, Texaco jumped 1 7/8 points to a high of 83 3/8 and Chevron climbed 1 3/8 points to 56 1/8.

British Petroleum American depositary receipts added 2 1/8 points to 103. Analysts expect the oil company to report its most profitable year when it announces 1995 earnings next week. Each of its ADRs represents 12 common shares.

* Duracraft surged 15 39/64 points to 43 7/64 after Honeywell Inc. said it would acquire the maker of home appliances for $283 million, or $43.50 a share. Honeywell added 7/8 point to reach 53 7/8.

* California Bancshares bounded 2 1/2 points to 30 1/4 after U.S. Bancorp offered to acquire the bank for $32.53 a share, or $327 million, in a stock swap.

Overseas, Frankfurt's DAX index rose 0.7% and London's FTSE 100 gained 0.3%. Japanese financial markets were closed Monday in observance of Foundation Day, a national holiday.

In the commodity market, seasonal factors were also working against gold, analysts said, with demand for the metal often turning sluggish in February in Asia and the Middle East.

Gold prices have shed at least $1 in five of the last six trading sessions, with the downdraft intensifying Friday and Monday as the market relinquished, in little more than a week, over half the gains from its 5-week-long new year's rally.

Although the spot gold contract managed to hold above $400, traders said the key test awaits at $398. A break below $395 may signal an end to the rally, analysts said.

Market Roundup, D8

RECORD RALLY: No end in sight for the bull market. A1.

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