Stock prices managed a slight gain Monday in slower trading on the Martin Luther King holiday. The dollar dropped, despite Iraqi hostilities.
The Dow Jones industrial average rose 3.79 points to 3274.91. The broader Standard & Poor’s composite index lost 0.31 of a point to 436.84. Investors turned to cyclical stocks and even out-of-favor International Business Machines.
Several computer and biotech stocks dropped, although microchip-maker Intel soared $4.87 to a new high of $116.62. IBM rose $1.25 to $49.50. The company is expected to report quarterly results Tuesday. Some analysts predict a loss.
Xerox dropped $3.62 to $83 after the company disclosed the expected decision to dump most of its remaining financial-services businesses, namely the Crum & Forster property and casualty insurance unit; the Furman Selz investment firm; and life insurance and annuity vendor Xerox Life.
Xerox is about to complete the sale of its Van Kampen Merritt mutual fund unit. The stock has been bid up in recent weeks because the company finally bit the bullet on exiting the financial-services business. But Monday’s news about a $778 million charge to earnings in the fourth quarter to cover the latest divestitures hit the stock.
Nasdaq biotech stock Centocor was hammered when the company said it was withdrawing a key drug because of “excess mortality” among patients using it. But the Nasdaq composite index recorded a slight gain of 0.98 to another record high, 698.13. Cellular phone stocks LIN Broadcasting and McCaw Cellular Communications helped boost the Nasdaq market.
Dollar trends
There was no “flight to quality” in foreign exchange trading after the weekend hostilities in Iraq. The dollar lost ground after a rumored cut in short-term German interest rates didn’t develop.
In addition, there is growing speculation that the Clinton administration will try to jerk long-term U.S. bond rates lower by reducing the size of the quarterly Treasury bond refunding in February. A reduced bond offering would push up the price and cut the yield.
Sustained high short-term rates in Germany and lower U.S. long-term rates are bearish for the dollar.
In New York trading Monday, the dollar fell to 125.55 Japanese yen from 126.10 late Friday. The dollar dropped to 1.6145 German marks from 1.6360 marks.
In Hanover, Germany, Helmut Hesse, a member of Germany’s Bundesbank decision-making council told Reuters Monday the central bank will lower short-term interest rates in 1993. But he said the timing of the cut remains an open question. Hesse said interest rate cuts should follow economic trends, not lead them.
In a separate speech, Bundesbank Deputy President Hans Tietmeyer said inflation in Germany was still too high at 3.7 percent.
Local news
– Portec, the Oak Brook-based maker of industrial material handling equipment jumped $1 to $8.12, a 365-day closing high. The company cited no reason for the jump except continued buying in the wake of last month’s decision by former Chairman Zohar Ben-Dov to sell his stake in the company.
– Playboy Enterprises stock got a boost Monday after an analyst at Josephthal, Lyon & Ross initiated coverage of the company with a “buy” rating. The analyst cited Playboy’s library of television programming material. Separately, Playboy Entertainment Group, a unit of Chicago-based Playboy, reached an agreement with the USA Network to air 26 half-hour episodes of Playboy’s dramatic series “Eden.”
– UNR Industries gained 25 cents to a 365-day closing high of $8.37 after the company disclosed a tax benefit will increase 1992 net income by $2 a share. A tax deduction for the company’s 1989 transfer of stock to an asbestos claims fund will substantially reduce the company’s tax liability in 1993 and 1994 as well. The company also announced a $2-per-share special dividend and a 20-cents-per-share regular dividend, both payable Feb. 1, will be a non-taxable return-of-capital.
