Wall Street broke its three-year string of Wednesday rallies before Labor Day. But the results weren’t bad.
The Dow Jones industrial average dropped 6.15 points to 3645.10 in moderate trading on the New York Stock Exchange. Broader market indicators also slipped, but there were more advancing issues than losers among NYSE-list stocks.
For the last three years, the Dow industrials had posted double-digit advances on the pre-Labor Day Wednesday.
Borden was the most active Big Board issue, closing up 50 cents, to $17.25, after a Wall Street Journal article suggested that certain food stocks may benefit from a little-noticed provision of the new tax law.
The Nasdaq composite index moved further into record territory for a third day, closing up 3.31 points to 746.15. Large-capitalization technology stocks led the way. Microsoft, which is having a good week, added $1.62, to $76.75. The software-maker ended last week at $71.87.
Bond yields inched down in quiet trading. The 30-year Treasury bond yield ended the day at 6.09 percent, down from 6.10 percent Tuesday. Short-term Treasury securities did less well.
Weakness in the outlook for jobs may be the wedge that separates the bond rally from the stock rally. The employment component of the National Association of Purchasing Managers’ report on business conditions for August fell to 40.4 percent from 43.2 percent. This kind of weakness is music to the bond market but eventually will spook stock investors.
Forecasters are expecting no dramatic shifts in Friday’s report on unemployment and payrolls. They’re estimating 100,000 to 150,000 new jobs, compared with a 162,000 gain in July.
Watch out if Friday’s number comes in at 200,000 or more. Such upbeat news could send the lofty bond market into a swoon in advance of a three-day weekend.
Cashing in
Deere, the Moline-based farm equipment-maker, sparked a robust stock rally last week when it surprised Wall Street with a more than tenfold increase in third-quarter net income. The company’s stock zoomed $5.25, to $74, on Aug. 24.
Deere officials are wasting no time cashing in on this good fortune. The company disclosed Wednesday it plans to offer to the public up to 8.05 million new shares. That’s more than 10 percent of the 77 million shares outstanding. Deere fell $2.62, to $70.25, as investors feared the new offering would dilute per-share earnings.
But Larry Hollis, who follows Deere for Robert W. Baird in Milwaukee, said those fears may be misplaced if Deere uses the expected proceeds of about $560 million to pay off high-interest debt. If Deere takes the money and invests in such profitable niches as commercial lawn-care equipment, current stockholders could be enriched, he added.
A Deere spokesman declined to elaborate on the company’s plans for the money but said Deere “always places a high priority on a sound and healthy balance sheet.”
That implies debt reduction. Deere last sold common shares in 1981, when the company raised $172 million by selling 4 million shares.
Hollis said new stock offerings are being well received, but “this is the first major capital-goods company offering that I’ve seen.”
Letterman’s Top 10
Comedian David Letterman should place Big Board stocks on his next Top 10 list: CBS stock was the ninth-highest percentage gainer on the New York Stock Exchange Wednesday, according to the Tribune’s daily list, which excludes stocks trading for less than $5.
CBS climbed $19 a share, or 7.7 percent, to $266, a 365-day high. Some analysts attributed the move to the bullish ratings Letterman is getting in the first week of his new “Late Show,” which airs against Jay Leno’s “Tonight” show and ABC’s “Nightline.”
General Electric, which owns NBC, dropped 12 cents, to $98.12. Capital Cities/ABC gained $2.12, to $513.62.
