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Dow snaps four-day slump
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August 27, 1997: 4:45 p.m. ET
Late-session buying reverses slide for blue chips and broader markets
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NEW YORK (CNNfn) - Blue chips and broader markets overcame sharp early losses Wednesday despite rumblings among some notable players that Wall Street is due for an extended slide.
Amid light trading and a lack of market-moving news, the Dow Jones industrial average snapped a four-session losing streak. It closed up 5.11 points at 7,787.33, battling back in the final hour from a deficit of more than 80 points. Gains by Disney (DIS), up 1 at 78-1/2, Merck (MRK), up 1-3/8 at 93, and Chevron (CHV), up 1-11/16 at 79-15/16, more than matched drops in the consumer and financial services sectors.
Broader markets also posted gains. Traders sent the S&P 500 index a slight 0.68 higher to 913.70 and the Nasdaq Composite up 4.24 to 1,595.54. The American Stock Exchange index improved 3.82 to 651.12. In New York Stock Exchange trading, declines outnumbered advances, 1,618 to 1,188, on volume of 497 million shares.
As they have for several weeks, stocks went through another rocky session. While not as volatile as recent performances, the market lacked the bullish splendor of earlier this summer and led to some disagreement over whether fundamentals are about to change.
Salomon Brothers' David Shulman, only recently converted to the optimistic camp, reversed course with a statement that he cut the firm's recommended asset allocation in stocks to 40 percent from 45 percent and increased the cash position to 25 percent. The influential strategist warned that inflation will soon be a problem and that the Dow could decline to 6,600. "We expect stocks to decline by 15 to 20 percent from their early August highs," he said. "A real correction, or a cyclical bear market, if you will."
Similar sentiments were voiced by such market players at Liz Miller at Trevor Stewart Burton & Jacobsen, a portfolio manager who is known for analyzing market trends with an eye on the economy. Miller warned that rising profits and low inflation cannot coexist forever. "We think this market has separated a bit from the economic fundamentals," she said. "We've enjoyed a great Goldilocks economy. This can't continue."
To be sure, sentiments are not with the bears. Mark Keller, senior investment officer at A.G. Edwards, agreed that the market could shed another 5 percent of its value in the ongoing pullback, but added "the bottom line is that the economy is still in great shape. Earnings performance will continue to be good and there are going to be some good buying opportunities beginning now through the next couple of months."
In stock trading, payroll processing firm Ceridian (CEN) said it will eliminate a major software product and take a $150 million charge against quarterly results. The news sent its shares down 5-15/16 to 37-1/16 as analysts decided the move is a blow to the long-term sales outlook. Ceridian also has hired Bear Stearns to sell its defense electronics unit, which accounted for about one-third of annual sales.
Elsewhere, Nike (NKE) fell 1-1/16 to 53-7/8 on a Wall Street Journal report that company insiders -- including its president and chief financial officer -- sold 467,492 shares in July.
Novell (NOVL) lost 19/32 at 9-3/8 one day after a 10 percent gain. Rumors escalated Tuesday that the company is a potential takeover target, possibly by IBM.
Telecommunications equipment maker Adtran (ADTN) fell 4-3/16 to 39-9/16, in step with a Goldman Sachs downgrade to "market outperform" from "buy."
On the earnings front, Lycos (LCOS) rose 4-1/8 to 33-7/8 as the Internet search-engine firm beat analysts' estimates with a quarterly loss of 4 cents a share, while transportation concern Celadon Group (CLDN) gained 3/8 to 12-5/8 on a better-than-expected quarterly profit.
And the share price sweetened at sugar refiner Savannah Foods and Industries following an unsolicited $497 million takeover bid from Imperial Holly. The offer disrupts Savannah's previous merger agreement with privately-held Florida Crystals. Savannah (SFI) shares jumped 2-1/2 to 17-9/16, while Imperial's (IHK) stock added 11/16 to 15-1/4.
-- David Rynecki
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