Dow off 10.80, but small stocks extend record highs

WALL STREET

December 02, 1992|By Bloomberg Business News

NEW YORK -- Stocks closed mixed yesterday, as a slump in shares of Walt Disney Co. dragged blue-chip issues lower. But over-the-counter stocks continued to climb to new highs.

Yesterday's performance, which ended a four-session rally that took broader market averages to successive highs, came in the face of more good news about the economy.

"We've been up for four days in a row, and it's time to take a rest," said Edward Collins, executive vice president of institutional trading at Daiwa Securities America.

The Dow Jones industrial average fell 10.80, to 3,294.36. Shares of Disney accounted for about half the decline.

The Standard & Poor's 500 slipped 0.57 from Monday's record high, to close at 430.78. The NASDAQ Combined Composite Index rose 1.22, to a record 653.95.

Small stocks continue to be driven up by the perception that President-elect Bill Clinton will move quickly to implement investment and tax credits for small businesses. In addition, "people claim you're getting the 'January effect' early," said Richard Ciardullo, head of trading at Eagle Asset Management. "The end of the year is when you want to buy some of these stocks that got beat up on tax-loss selling."

The government said the index of leading economic indicators rose 0.4 percent in October, matching economists' expectations. Meanwhile, the National Association of Purchasing Managers index surged to 55 in November, from 50.6 in October, the best reading since May. An index above 50 suggests expansion in the manufacturing sector.

Also, construction spending, benefiting from the lowest mortgage rates in decades, climbed a higher-than-expected 1 percent in October, after having risen 1.8 percent in September.

Walt Disney, the most active stock, fell $1.875, to $40.375. Disney's chairman, Michael Eisner, and president, Frank Wells, together sold 5.09 million shares, at $40 a share. The executives said they had exercised stock options solely in anticipation of new tax legislation.

The Disney executives were not the only investors who sought to

realize profits at 1992 tax rates. December typically brings an onslaught of selling by investors seeking to cash in gains from the year's winners or to generate tax losses to offset profits elsewhere.

"People are trying to lock in profits before the end of the year," said Mr. Ciardullo of Eagle Asset Management.

"We've got a lot of year-end crosscurrents," said Barry Berman, head trader at Robert W. Baird in Milwaukee. "There were a lot of non-believers in the market for a big part of the year, and this is their last chance here in December."

Declining stocks outnumbered advancing issues, 794-to-759, on the New York Stock Exchange. Trading was heavy, with 259 million shares changing hands.

Stocks in international oil, electrical equipment, entertainment and general retail stores fell the most among S&P 500 issues. Retailers have rallied in recent days on expectations for the best holiday sales in four years. Prudential Securities removed its "buy" recommendations on several retailers yesterday.

NationsBank rose 25 cents, to $50.625. The stock went ex-dividend Monday. Several large blocks tied to dividend-capture strategies were included in yesterday's turnover.

Digital Equipment slumped $1.375, to $32.875. The stock opened down more than 1 point after large sell orders caused trading to be delayed about an hour. The delay spawned rumors of a product defect and selling by Digital employees. The company denied the product-defect rumors, and said that although some workers recently became eligible to sell stock bought under an employee ownership plan, several large blocks were offered for sale by non-employee shareholders.

Banc One dropped $1.25, to $48.25, after having risen $1.25 Monday, after it said it had completed the acquisition of Dallas-based Team Bancshares Inc.

Comptronix Inc. lost $1.375, to $7.375, after reports of shareholder lawsuits charging the company and three suspended officers with violating securities laws by issuing false and misleading financial statements.

Musicland Inc. dropped $1, to $12.875, after PaineWebber lowered its rating to "attractive" from "buy."

Baker Hughes declined $1.375, to $18.375. A company official said analysts' first-quarter earnings estimate of 19 cents a share was too optimistic.

Unisys gained $1.25, to $9.875, after Josephthal Lyon & Ross raised its rating to "buy" from "hold."

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