The stock market burped.
The Dow Jones industrial average, after a four-day Thanksgiving rally that added 82 points or 2.5 percent, dropped 10.80 points to 3294.36. After a sharp drop at the opening bell, the Dow industrials were unable to hold above the 3300 mark.
Broader market indexes also declined, except the Nasdaq composite index, which advanced to a fifth straight record, up 1.22 to 653.95.
Big Board volume totaled 259 million shares. Tuesday`s action saw some large-block selling related to worries about taxes under the incoming Clinton administration.
For example, the most active NYSE-listed stock was Walt Disney, off $1.87 to $40.37. Disney Chairman Michael Eisner and President Frank Wells sold 5.1 million shares at $40 a share through Goldman, Sachs & Co. Eisner cited possible tax law changes for the move.
Some retailing stocks, which have soared on Christmas euphoria, were marked down Tuesday. Nordstrom lost 75 cents to $37. Sears dropped 12 cents to $43.12; Walgreens slipped 50 cents to $43.62; K mart fell $1.25 to $26.50.
The yield on the 30-year Treasury bond dropped to 7.56 percent from 7.59 percent after Federal Reserve Board Chairman Alan Greenspan reiterated his pledge to flight inflation and keep a close watch on the nation`s money supply. Shorter-term Treasury yields continued rising, however.
CNW shares sold
Year-end tax strategies apparently prompted two 2 million-share trades in the stock of Chicago and North Western Holdings. Two of the institutional investors that staged a leveraged buyout of the company in 1989-Blackstone Capital Partners and Donaldson Lufkin Jenrette-each sold 2 million shares.
The Donaldson Lufkin Jenrette shares were sold at $19.50, reportedly to four mutual funds. In the late trading session on the New York Stock Exchange, Blackstone sold 2 million shares, apparently at the closing price of $20.37, to Union Pacific Corp. Donaldson Lufkin Jenrette and Blackstone had acquired the stock in the buyout for $5.88, putting Donaldson Lufkin Jenrette`s gain at $27.2 million and Blackstone`s gain at $29 million.
The shares bought by Union Pacific were converted into non-voting stock. Union Pacific, with CNW`s blessing, is seeking Interstate Commerce Commission approval to convert its total CNW holdings-about 12 million shares-into voting shares.
CNW and Union Pacific agreed in March that Union Pacific would not buy more than 30 percent of CNW`s 43 million shares until after March 1994. The two rail lines form a strong link across the western United States.
Despite signs of a recovery and successful cost-cutting by the company, CNW shares have languished since the company re-emerged as a publicly traded company in March. One reason is that only about 14 million shares are available for public trading. The rest are held by Blackstone, Donaldson Lufkin Jenrette and company executives.
Remy Fisher, a rail stock analyst for Kemper Financial, said she suspects Blackstone and Donaldson Lufkin Jenrette will attempt to sell more of their holdings before year`s end, in part to avoid possibly higher capital gains taxes next year. Getting more shares in the hands of the public will help the stock price, she said.
Cost cuts, especially lower labor costs, have given CNW and other railroads great ”earnings leverage” if the economic recovery picks up steam, she said. CNW closed down 62 cents at $20.37 Tuesday.
Higher payouts
The number of companies increasing dividend payouts rose sharply in November, a sign of increased confidence in corporate America`s ability to turn a profit.
Standard & Poor`s Corp. analyst Arnold Kaufman said 146 companies boosted their payout last month, up 39 percent from the 105 companies that did so in November 1991, according to Dow Jones News Service. The number of dividend increases in the latest month was the highest for any single month since February 1990.
”The November dividend actions confirm the recent improvement in the economy,” said Kaufman, adding that businesses are demonstrating greater confidence in their earnings trends. He said the number of companies that cut or omitted their dividends last month fell by nearly 30 percent.
