Tax worries weigh on stocks Dow off 30

WALL STREET

February 13, 1993|By Bloomberg Business News

NEW YORK -- Stock prices finished lower yesterday as equity investors weighed the drawbacks of possible tax hikes in President Clinton's deficit-cutting package.

An early slump in Treasury bond prices, as well as plunges in health care and oil stocks, also drove shares lower, traders said.

The Dow Jones industrial average fell 30.26 to close at a session low of 3392.42, down 49.71 points from its all-time closing high of 3442.14, set last Friday. Allied-Signal Inc. accounted for about 5 points of the slide. Allied-Signal, down $2.25, at $64.625, yesterday, had rallied 16 percent in the past two weeks after reporting strong earnings.

Among broader averages, Standard & Poor's 500 index eased 3.08, to 444.58, and the NASDAQ Combined Composite fell 5.34, to 690.54. Declining common stocks topped advancers by a margin of 9-to-5 on the New York Stock Exchange.

Trading was the lightest of the week, with more than 215 million shares changing hands on the Big Board, down from 253 million Thursday. Financial markets will be shut Monday in observance of Presidents Day.

"Investors are starting to focus on the realization that President Clinton is going to propose a series of tax increases," said Daniel Marciano, head trader at Dillon, Read & Co. The stock market doesn't like higher taxes because they mean investors have less money to spend on stocks, he said.

"Every dollar that goes into taxes comes out of consumption or investment," said Jim Benning, a trader at BT Brokerage.

Treasury bonds recouped an early drop to close higher amid continuedhopes for deficit reduction, driving yields to their lowest level ever. The hopes were fanned by news that Treasury Secretary Lloyd Bentsen asked Treasury tax staffers to develop revenue estimates for 30 separate tax proposals.

The current 30-year bond gained 10/32, to close at 100 1/32 as of 2 p.m. EST. The yield was 7.12 percent, equaling the lowest closing yield since the Treasury regularly began selling 30-year bonds in 1977.

The Labor Department reported more evidence yesterday morning that inflation remains under control -- U.S. wholesale prices increased just 0.1 percent in January.

International oil, electrical equipment, financial, and household issues eased the most in the S&P 500. Long-distance carriers, general retail stores, health care, and medical products advanced the most.

Atlantic Richfield Co. fell $2, to $117.375, and Amerada Hess Corp. eased $1.50, to $49.75 after a PaineWebber Inc. analyst cut his ratings to "unattractive," advising investors to shift into overseas oil companies.

U.S. Healthcare Inc., Sequent Computer Systems Inc., RJR Nabisco Holdings Corp., General Motors Corp., and Student Loan Marketing Association were the five most actively traded issues.

Shares of health maintenance organizations plunged further after a First Boston analyst said the California Public Employees Retirement Systems' negotiation of lower 1993-1994 premiums from 19 HMOs might signal an industry trend. U.S. Healthcare tumbled $4.125, to $48.375; Foundation Health dropped $5.50, to $33.625; Oxford Health Plans sank $5, to $52, and United Healthcare skidded $6.125, to $55.75.

Sequent Computer closed unchanged, at $21.125. The company sold 3.7 million shares at $21.125 each through underwriters led by Goldman, Sachs & Co.

Stocks of the three biggest domestic airlines gained after a Merrill Lynch analyst boosted her investment ratings on the group, citing an improved industry outlook. UAL Corp., parent of United Airlines, rose $1.50 to $126, AMR Corp., American Airlines' parent, climbed 87.5 cents to $63, and Delta Air Lines Inc. rose 75 cents to $51.375.

Sears, Roebuck & Co. went up $1.25, to $52.75. Merrill Lynch raised its rating to "above average" after an analysts meeting at which the company outlined a $4-billion, five year program to upgrade stores.

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