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MARKET SAVVY

Stocks Give Ground Despite Internet Surge

November 11, 1998|From Times Staff and Wire Reports

The stock market closed broadly lower Tuesday for a second consecutive session, despite soaring prices for many Internet-related shares.

Profit-taking after weeks of heady market gains pulled the Dow Jones industrial average down 33.98 points, or 0.4%, to 8,863.98, after a 77-point drop on Monday.

In the broad market, losers outnumbered winners by 18 to 13 on the New York Stock Exchange and by 22 to 18 on Nasdaq. The Russell 2,000 index of smaller stocks slipped 0.4%.

Trading volume picked up from Monday's pace but remained well below recent peaks, suggesting the selling pressure wasn't very heavy in most stocks.

Analysts say some investors are pulling back on concern that the Federal Reserve Board may not follow up its two recent interest rate cuts with a third when policy-makers meet Tuesday.

The two previous rate cuts, aimed at helping stabilize the troubled global financial system, sparked a worldwide rally in stocks, sending the Dow up 17%.

But Fed officials have said in recent days that the financial system strains are easing--which may cause the central bank to think twice about cutting rates further.

"Broadly speaking, the Fed accomplished what they wanted to do," said Sam Paddison, who oversees about $11 billion at First Capital Group in Philadelphia. "They calmed fears and appear to have stabilized markets."

The dollar rose again Tuesday, which traders said reflected the currency market's doubts about another rate cut. If U.S. rates stay relatively high, they may make dollar-denominated assets more appealing to foreigners.

The dollar gained for a sixth straight session against the yen, reaching 122.52 yen. There also was speculation that a plan due this week to help turn around Japan's economy might fall short of hopes, leading to a weaker yen.

That prospect helped trigger profit-taking in many smaller Asian markets. South Korean stocks slumped 5%.

In the bond market, Treasury yields continued to ease, after surging in recent weeks. The 30-year T-bond closed unchanged at 5.29%. Shorter-term yields fell.

Many bond investors were focused on the sale of $5 billion of higher-yielding debt by a unit of Sprint. Sprint Capital, the finance arm of the nation's No. 3 long-distance phone company, increased its bond sale to about 2 1/2 times its original size, a further sign that stability is returning to financial markets.

The sale represented the second-largest corporate bond sale ever.

For Wall Street, a potentially positive note for today's trading is that computer chip giant Intel announced after the close of trading Tuesday that current-quarter sales will be above expectations.

Among Tuesday's highlights:

* Energy stocks were particularly weak on worries about the continuing oil glut. Exxon fell $1.88 to $70.13, Halliburton dropped $2.31 to $33.88 and Chevron fell $1.94 to $80.50.

* Financial stocks were lower in profit-taking after their recent rebound. American Express fell $1.81 to $93.06, T. Rowe Price slumped $2.75 to $31.94 and BankBoston fell $2.63 to $40.19.

* DuPont, the biggest U.S. chemical company, fell $2.63 to $59.25, accounting for a third of the Dow average's decline. DuPont slid after Germany's BASF, Europe's top chemicals manufacturer, said business in the third quarter fell short of expectations and warned that it doesn't expect economic conditions to improve this year.

* On the plus side, the tech sector shined, led by Internet-related stocks. Net search vehicles and commerce sites such as Yahoo, EBay and Amazon.com rallied on speculation that they will benefit from a surge in online revenue during the holiday season.

"It's probably going to be a breakout year for electronic commerce," said Mike Wallace, an analyst with Warburg Dillon Read.

Yahoo zoomed $11.81 to $176.56, EBay soared $27.88 to $130.88 and Amazon.com gained $4.88 to $131.75. Bigger tech names also continued to gain, led by IBM, up $4.63 to a record $156.

Market Roundup, C9

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