U.S. stocks took a breather Tuesday following three ays of gains as the Dow Jones industrial average closed unchanged at 8,706.15.
"Today's pullback is just a pause following the big run-up we've had," said Bob Basel, head of listed trading at Salomon Smith Barney. Since Thursday's low, the Dow has run up 377.18 points, or 4.5 percent.
The last time the Dow ended a session exactly where it began was nearly two years ago on Dec. 2, 1996, when the blue-chip barometer was 2,200 points lower at 6,521.70.The congressional elections had little impact on the day's activity. One-third of the seats in the Senate and every seat in the House of Representatives are up for grabs.
"If you're going to have any reaction to the elections, it's probably more Wednesday or late today, when you get a feel that maybe some kind of upset or swing is taking place that nobody expected," Basel said.
"With all of the pre-election polls, the outcome of the elections is already built into market prices," he added. "You already have a feel for what the bigger picture is going to be."
With little on the day's economic calendar, and with the third-quarter earnings season all but over, the focus remained on the outlook for further Federal Reserve interest rate cuts and U.S. economic growth in general.
Many on Wall Street believe the recent run of buoyant economic data will not dissuade the central bank from cutting rates again. The Fed's policy-setting panel next meets Nov. 17.
On the day's economic slate, the Conference Board reported that the September index of leading economic indicators was flat. The report failed to budge bond prices.
In Tuesday's trading, the energy, utility, and basic resource sectors were the only broad sectors to advance. Small-cap stocks closely tracked the gains in blue-chip names. Their recent revival has sparked debate over whether or not an extended period of outperformance is likely.
"The recent rally in small-cap stocks can only be described as explosive, and the fuel for this blastoff is only partialy burned," L. Keith Mullins, small-cap expert at Salomon Smith Barney, said in a recent research report.
"The rally should continue as global risk premiums come down, tax-loss selling ends, and portfolio managers use their huge cash reserves."
In Tuesday's market indicators:
- The Standard & Poor's 500 Index fell 0.1 percent.
- New York Stock Exchange advancing issues led decliners by 8 to 7.
- On the Big Board floor, turnover slowed 7 percent to 700 million shares.
- The Nasdaq Composite declined 0.7 percent. Advancing issues lagged decliners by 58 shares in the Nasdaq Stock Market. Volume totaled 882 million shares.
- The Russell 2000 Index of small-company stocks gained 0.2 percent.
- In the bond market, Treasurys remained higher on the heels of two rate cuts in Spain and Sweden, which spawned a jump in European bond markets. The 30-year Treasury advanced 12/32, to yield 5.223 percent.
Among the stocks in the news:
- Aon (AOC) slumped 5 5/8 to 55 1/2. The insurer guided Wall Street to expect fiscal fourth-quarter earnings to come in at the bottom end of the 70-cent-to-80-cent range expected by most analysts.
- US Office Products (OFIS) stumbled 1 11/16 to 6 15/16. The company said it will likely break even in its fiscal second quarter. Most analysts had expected net to come in around 5 cents to 6 cents a share. The company blamed higher interest expense as among the reasons for its warning.
- Cerner (CERN) shed 2 1/2 to 21 1/16. Morgan Stanley Dean Witter lowered its rating of the developer of software for clinical information systems to "neutral" from "outperform."
K-Tel International (KTEL) nearly doubled, jumping from 6 3/8 to 13 1/4. The company will produce an online music outlet with a unit of Playboy Enterprises (PLA). The store will be located within the playboy.com site.
- Merrill Lynch (MER) tacked on 7/8 to 61 7/8. Warburg Dillon Read upped its opinion of the broker to "buy" from "hold."
- Citigroup (CCI) fell 2 to 44 1/8. Over the weekend, President Jamie Dimon, whom many tabbed as the heir apparent of Citigroup Co-Chief Executive Sanford Weill, resigned.
- Consumer credit card provider Metris (MTRS) sank 4 to 32 3/4 on news its chief financial officer quit.
- Boston Scientific (BSX) said the president of its international operations resigned. The maker of medical devices also said it uncovered accounting irregularities totaling $40 million to $50 million at its Japanese operations. The stock fell 5 7/8 to 46 3/8.
- Cisco Systems (CSCO) retreated 1 5/16 to 63 3/8. It reports fiscal first-quarter net Wednesday. The Street looks for 33 cents a share. The networking interest logged a profit of 26 cents a year ago.
- Nearly every technology benchmark ended in the minus column. On the positive side of the slate, MCI WorldCom was ahead 3/8 to 55 7/16. Meanwhile, 3Com fell 2 1/4 t34, EMC 3/4 to 64 3/8, Dell Computer 1 3/4 to 64 3/8, Intel 1 3/8 to 90 7/16, and Lucent Technologies 1 1/16 to 82 3/16.