Dow industrials meet resistance at 5,000 level Average crosses barrier twice, slips 6.86 to 4,983.09

'Everybody is euphoric'

Technology stocks are exchanged for less volatile shares

November 21, 1995|By Bill Atkinson | Bill Atkinson,SUN STAFF Bloomberg Business News contributed to this article.

Cheers erupted from trading floors on Wall Street yesterday ** as the Dow Jones industrial average crossed the magical 5,000 mark twice before closing at 4,983.09.

The index of 30 companies climbed to 5,000.07 about a half-hour after the opening bell and surged to a record 5,003.68 points before bouncing up and down and finally running out of steam. By day's end, the Dow was down 6.86 points.

But the rally petered out as investors sold off technology stocks, trading them for more stable companies.

The Dow's performance over the past year has impressed Dow watchers, despite failing to close above the 5,000 mark.

"This is a phenomenal year," said Rob Brown, market strategist with Ferris, Baker Watts Inc. in Baltimore. "We've never had a Dow that has gone over 1,300 points" in a single year.

"Everybody is euphoric. Everybody is making money."

Mr. Brown said investors have been buying in anticipating of a budget agreement between Republicans and the White House.

"Once they have the facts of that agreement, they will sell on the news," he said.

The Dow is being driven by investor confidence buoyed by strong corporate profits, low inflation and low interest rates.

There is a sense the U.S. economy is growing at a slower but stable rate of growth," said Larry Puglia, co-manager of T. Rowe Price Associates Inc.'s Blue Chip Growth Fund.

He said foreign investors, which include large pension funds, have recently jumped into the U.S. market and have helped push it higher.

Mr. Puglia wasn't disappointed that the market didn't close above 5,000 yesterday. "It's probably due for a rest," he said.

The broad market was hit worse than the 30 stocks in the Dow. The Standard & Poor's 500 index, representing 75 percent of the value of all stocks in the U.S., fell 3.22, or 0.54 percent, to 596.85. The Nasdaq composite index slid 15.56, or 1.49 percent, to 1,029.47, its biggest drop since last Tuesday.

The Wilshire 5000 index fell 34.64, or 0.59 percent, to 5,873.11; the Russell 2000 index dropped 1.62, or 0.53 percent, to 302.22; and the American Stock Exchange market value index fell 0.37, or 0.07 percent, to 531.59.

Almost 13 stocks fell on the New York Stock Exchange for every 10 that rose. Big Board volume dropped to 333.2 million shares, down from 429.41 million shares Friday.

Lower prices for computer, semiconductor, software, telephone and brokerage shares overshadowed small gains in retail, auto, photography, entertainment and tobacco issues.

Computer stocks reacted for a second day to Hewlett-Packard Co.'s earnings Friday. The Palo Alto, Calif., company said more of its fiscal fourth-quarter profit came from products that carry lower profit margins.

Among computer makers, Hewlett-Packard slid $4.50, to $84; International Business Machines Corp. fell $2.125, to $93; Sun Microsystems Inc. dropped $5.875, to $81.625; Intergraph Corp. fell $1.75, to $16.625; and Compaq Computer Corp. declined $1.875 to $48.625. Other high-tech stocks skidded. Applied Materials Inc. dropped $3.875, to $42.75; Xilinx Inc. dropped $4.875, to $32.125; and KLA Instruments Corp. slumped $5.75, to $30.50.

Many investors and traders said last week's stock-market advance, during which the Dow industrials notched a 2.46 percent gain and posted four records, means that prices already reflect the most favorable outlook possible for both the economy and slower growth in government spending, and that prices are now more likely to fall than rise.

"I vote that 5,000 could be some sort of reasonable resistance" point for the stock market, said Edward Laux, head trader at Chicago Corp. With the S&P 500 ahead by 30 percent this year, "stocks are kind of overextended."

Hersh Cohen, who manages the $1.9 billion Smith Barney Appreciation Fund, also sees trouble ahead for the stock market.

"A year ago, [market] expectations were very low and interest rates were very high," Mr. Cohen said. "Today, expectations are very high and interest rates are very low. So if there's going to be a surprise, which way do you think [the market] is going to go?"

The largest gains in the Dow industrials came in Eastman Kodak Co., ahead $1.375, to $70.25; Texaco Inc., up $1, to $72; and Walt Disney Co., advancing $1, to $60.25.

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