Blue-Chips Drop, Small Stocks Fly
Smaller company stocks set new highs again, boosting the broad market, but blue-chip shares struggled Monday amid some new data contradicting recent signs that inflationary pressures are easing.
The Dow Jones industrial average gave back an early 23-point gain, falling 41.64 to 7,289.40 even as bonds recovered from a morning dip on news of surprisingly robust manufacturing activity during May.
Broader indicators were mixed. The Russell 2000 list of smaller companies closed at a record high for the seventh straight session, bringing its gain over that span to 3.6 percent.
Stocks initially drew some support from the bond market, where interest rates edged lower amid news that income growth and spending growth slowed to a crawl in April. The Commerce Department report reinforced other indications that economic activity may be easing enough to keep inflationary pressures tame without another boost in interest rates by the Federal Reserve.
Monday’s mood soured, however, after a separate report showed that factory activity was surprisingly robust in May, suggesting the pace of business may be picking up again.
Some of the stocks that moved substantially or traded heavily Monday:
NYSE
International Family Entertainment, up 4 at 31-7/8.
Rupert Murdoch’s News Corp. and Walt Disney Co. will make final bids for the parent of the Family Channel early this week, Variety and Reuters reported. The price tag has already risen as high as $1.8 billion, or $37 a share, the reports said, citing sources.
Procter & Gamble, down 4-1/4 at 133-5/8.
Smith Barney downgraded the consumer products giant from “buy” to “outperform,” the Dow Jones News Service reported, citing a source at the investment firm.
NASDAQ
Boston Chicken, down 1-7/8 at 16-1/8.
The struggling restaurant chain announced plans to cut 23 percent of its headquarters staff in an effort to trim about $7 million to $10 million in annual expenses after this year. Boston Chicken also said it will sharply cut back on offering coupons.
Nastech Pharmaceutical, up 2-1/2 at 12-1/8.
A securities analyst praised Nastech’s nasal-spray drug delivery system and said its stock was a bargain. Eric Elliott, the managing director of Barber & Bronson, a Miami securities firm, made the comments on CNBC’s Squawk Box program.
APS Holding, down 2 at 8.
The auto parts maker warned that it will post weaker-than-expected earnings. APS, based in Houston, said the losses will lead it to close unprofitable outlets.