Stocks drop as recovery falters, but Dow gains 4

WALL STREET

April 02, 1993|By Bloomberg Business News

NEW YORK -- Stocks edged lower yesterday amid signs that the economic recovery is on shaky footing.

The Dow Jones industrial average, which fell 22.19 Wednesday even as the broader market rose, recouped part of that loss yesterday. The Dow gained 4.33, to 3,439.44, led by advances in International Paper Co. and International Business Machines Corp.

Broader measures fell. The Nasdaq Combined Composite index declined 3.49, to 686.64, and the Standard & Poor's 500 index lost 1.37, to 450.30. The American Stock Exchange Market Value index fell 0.66, to 422.77.

Declining stocks exceeded advancing issues by 9-to-7 on the New York Stock Exchange, where 234 million shares were traded.

"The economy definitely looks like it's cooling here, and that's concerning, especially since so many people have expected a robust economic recovery," said A.C. Moore of Argus Investment Management.

The National Association of Purchasing Managers said its March index of manufacturing conditions fell to 53.4 in March, from 55.8 in February, indicating a slowdown among manufacturers. The Commerce Department reported that construction spending rose 0.1 percent in February, below expectations of a 0.7 percent increase. And the Labor Department said initial claims for unemployment benefits rose 33,000, to 380,000, an unexpected increase, in the week that ended March 27.

The Labor Department is due to report today on March employment. Economists expect the report to show that the economy created 99,000 nonfarm jobs in March. The jobless rate is expected to remain unchanged, at 7 percent.

"If the employment report is weak, it will confirm everybody's fears about the economy," said Benedict Capaldi, fund manager at Brandywine Asset Management.

"The market is in limbo," said Richard Ciardullo, director of trading at Eagle Asset Management. "Everybody's waiting to see whether interest rates have bottomed. If this is the case, the stock market could be in for some big problems."

Treasury prices fell as traders turned away from the weak economic reports to focus on the possibility inflation might be accelerating. The 30-year bond closed down 1/2 point, and its yield rose to 6.96 percent, the highest since mid-February.

"It doesn't look like inflation is dead," Mr. Capaldi said. "That's not good news for the bond or stock market."

The Commodity Research Bureau's index, which tracks

commodity prices, has risen 7.6 percent since Feb. 8, in a signal that inflation is rising. Robert Parry, president of the San Francisco Federal Reserve Bank, said yesterday that the Fed must act to curb inflation.

Oil stocks, whose performance tends to rise and fall with the economy, were among the worst performers yesterday. Chevron fell $1.375, to $81.75; Exxon declined 50 cents, to $65.625; and Mobil dropped 62.5 cents, to $68.125.

Cable stocks slumped after the Federal Communications Commission adopted regulations to roll back by 10 percent the rates that most cable TV systems charge and to limit their future increases. Tele-Communications fell $2, to $20.50, and Time Warner dropped $1.75, to $33.

Primerica declined $1.375, to $44.75. The investment and insurance company sold 7 million common shares to a group led by Morgan Stanley International for resale to foreign investors.

Cooper Industries fell for a second straight day, closing down $2.625, to $48. The company said earnings growth will be lower than expected in the first half of the year. The stock had fallen $2.50 Wednesday.

Walbro fell again on the company's forecast that 1993 earnings will fall below expectations. Lehman Brothers lowered its rating of the stock to "neutral." The stock lost $2.25, to $28.25.

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