Stocks Pull Back After 3-Day Rally
Stocks pulled back Friday amid some mild profit-taking on a three-day rally that put the market back in record territory for the first time since early December.
The Dow Jones industrial average fell 66.52 to 7,906.50, trimming the week’s gain to 205.76 and leaving the blue-chip barometer with a microscopic loss of 1.75 points after the first month of 1998.
Broad-market indexes also finished lower Friday after a brief foray into record terrain by the Standard & Poor’s 500, which on Thursday closed at a new high for the first time since Dec. 5.
“After enjoying several days of healthy gains, investors have decided to be cautious and take some profits going into the weekend,” said Sung Won Sohn, chief economist at Norwest Corp. in Minneapolis.
Even with Friday’s downturn, the S&P; 500 finished with a gain of 1 percent for January, a month that has accurately predicted the market’s course for the next 11 months about three-quarters of the time. Three weeks ago, the S&P; 500 was down a worrisome 5 percent for the new year.
The markets have been bolstered in recent days by some robust reports on fourth-quarter profits, a lessening sense of alarm about the crises in Asia and Washington, and Thursday’s appearance before a Senate panel by Federal Reserve Chairman Alan Greenspan.
Stocks opened lower on Friday, but began to recover as Greenspan and Treasury Secretary Robert Rubin, addressing a House panel, offered a generally upbeat prognosis of the economic crisis in Asia.
“At a time when we need confidence from public officials, we’re at least getting some from Rubin and Greenspan,” said Hugh Johnson, chief investment officer at First Albany Corp.
Also helping ease some of the worry about an Asian-induced slowdown in this country was a report that the U.S. economy expanded at full throttle during the last three months of 1997, punctuating a remarkable year that saw the strongest growth in nearly a decade and the mildest inflation since the mid-1960s.
The Commerce Department said the nation’s gross domestic product grew 4.3 percent in the fourth quarter, significantly better than most economists had calculated, while inflation ran at a scant 1.5 percent rate during the period, slightly lower than expected.
“That report tells us that a recession is not in the cards,” said Johnson. “I don’t think investors believe for one minute that the economy won’t slow down this year. But although we’re going to slow down, we’re not going to have a recession.”
Declining issues barely outnumbered advancers on the New York Stock Exchange, where volume totaled 613.38 million shares - heavy, but off sharply from Thursday’s blistering pace, which saw 754.46 million shares change hand, the fourth biggest tally ever.
Overseas, Tokyo’s Nikkei stock average fell 2.3 percent, Frankfurt’s DAX index rose 0.5 percent, and London’s FT-SE 100 rose 0.7 percent.
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