Small stocks rally, but Dow drops 15.40 points

November 11, 1992|By Bloomberg Business News

NEW YORK -- Stocks were mixed yesterday as small-company issues rallied on speculation that smaller companies will be the first to gain from President-elect Bill Clinton's economic recovery plans.

The Dow Jones industrial average lost 15.40 points, to close at 3,225.47, with losses in International Business Machines Corp., Du Pont Co. and International Paper Corp. pulling down the average. Advancing issues on the New York Stock Exchange led decliners by an 8-to-7 margin.

The NASDAQ Composite Index of smaller over-the-counter stocks rose 5.71 points, to 627.76. The Standard & Poor's 500 rose 0.02, to 418.16. Advancing stocks outpaced decliners by an 11-to-8 margin on the NASDAQ.

Despite the poor performance of some companies in the Dow, the broader market is not expected to give up gains made in recent weeks.

"What the market is saying is the economy is still slow, but there are incentives to help small businesses," said James Meyer, director of research at Janney Montgomery Scott.

Trading volume on the NASDAQ system eclipsed volume on the NYSE for a second day in a row. NASDAQ volume was 224 million shares; Big Board volume was 229 million shares. When this occurs, analysts fear that speculators may be pushing prices to unsustainable levels.

"The NASDAQ isn't inflated yet," said Steven Goldman, a market strategist with Weeden & Co. "But if volume continues to rise, it's a sign of overspeculation."

The Labor Department reported yesterday that wholesale prices rose 0.1 percent in October, a figure that suggested that inflation was being controlled by a lackluster economy and by sluggish consumer spending on new autos. Excluding food and energy, the producer price index core rate declined 0.1 percent in October.

Signs that inflation is under control gave bonds a boost yesterday. Bonds also got a lift from better-than-expected demand at the second leg of the Treasury's record $37 billion note auction. The Treasury sold $11.25 billion in 10-year notes, at an average yield of 6.93 percent.

Low inflation and a stronger dollar are helping both the bond market and the stock market, said Don Hays, director of investment strategy at Wheat First Butcher & Singer.

"The dollar has been very strong," Mr. Hays said. "Commodity prices are down. Bonds are up. It gives an indication that the [Federal Reserve] will ease again."

Southland Corp. was the most active stock, after UBS Securities handled the sale of a 1.5-million-share block.

Food Lion Class A shares rose 25 cents, to $8. The stock recovered a bit after having tumbled last week from a negative report on ABC-TV's "PrimeTime Live." The company said yesterday that it plans advertisements to counter reports of unsanitary store conditions. Still, analysts reduced ratings and earnings estimates yesterday, citing lower sales as a result of the television report.

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