Drug, computer stocks slump Dow down 16


March 25, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks fell yesterday for a thir consecutive session, after a profit warning from Merck & Co. triggered widespread selling in drug shares.

Higher Treasury bond yields and lingering concern about the political situation in Russia also drove stocks lower, traders said. After drug stocks, computer issues, led by International Business Machines Corp., posted the biggest losses.

"There are a number of things hurting the market," said Thomas Gallagher, managing director in charge of capital commitment at Oppenheimer & Co. "Bonds are going down, and stocks are under pressure because of the drugs."

The Dow Jones industrial average recovered in the final half-hour to finish down 16.48, at 3,445.38, helped by a late round of computer-guided buy orders involving about 300 stocks in the Standard & Poor's 500, according to Birinyi Associates. Rebounds in oil shares offset big declines in IBM and Merck.

Earlier, the average skidded more than 30 points, to a session low of 3,430.52. The average now sits about 33 points below its record close of 3,478.34, set March 10.

Stocks slid after opening higher on news of an unexpectedly big rise of 2.2 percent in February durable goods orders. "This report is certainly good news in that it means the economy is getting stronger," said Tony Cecin, director of trading at Piper, Jaffray & Hopwood Inc.

Treasury bonds fell after the durable goods report, stabilized briefly, and then dropped further, though the Treasury's sale of $15.25 billion in two-year notes drew an average yield that was lower than expected.

The yield on the benchmark 30-year bond was 6.81 percent, up 4 basis points on the day.

The 30 Dow industrials climbed to their session high of 3,480.50 within the first two hours, then sank about 10 points once Merck opened for trading on the New York Stock Exchange at 10:45 a.m.

"We did see bargain-hunting in the drugs" earlier yesterday, "and that just fizzled," said Richard Ciardullo, director of trading at Eagle Asset Management. "We're seeing money moving out of growth issues and into some of the cyclicals."

Yesterday's losses extend two days of declines touched off by skittishness about the political battles between Russian President Boris N. Yeltsin and the parliament.

"There's always the freak-out factor," said Philip Smyth, a market analyst at Birinyi. "People get upset about these things, and they sell their stocks."

The Standard & Poor's 500 Index finished 0.69 point lower, at 448.07. The Nasdaq Combined Composite Index lost 0.68, to 674.36.

Declining common stocks topped advancers 8-to-7 on the New York Stock Exchange. Trading was active, with about 274 million shares changing hands on the Big Board.

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