Weak reports depress stocks Dow off 11

WALL STREET

June 30, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks declined yesterday as renewed concern about the economy and computer industry profits led investors to cash in gains from Monday's rally, traders said.

Stocks weakened after economic reports showed consumer confidence fell in June, the index of leading economic indicators slumped and new-home sales plunged 21 percent in May, the sharpest decline in 13 years.

"One day we have reports that the economy is picking up and the next day that it's slowing down," said Ricky Harrington, senior vice president at Interstate/Johnson Lane in Charlotte, N.C. As a result, "the market has been so fragmented recently, it's been very difficult to put two consecutive up days together."

The Dow Jones industrial average, which fell as many as 24.36 points, closed down 11.35 points, at 3,518.85. The index soared 39.31 Monday. Yesterday's decline was led by AlliedSignal Inc., International Business Machines Corp. and Eastman Kodak Co.

Among broader market averages, the Standard & Poor's 500 Index was down 1.16 points, at 450.69, and the Nasdaq Combined Composite Index was down 1.77 points, at 701.07, after vaulting 8.02 yesterday.

On the New York Stock Exchange, decliners led advancers by a

narrow margin. Trading volume was active, at 276 million shares, helped by about 34 million shares in Argentine oil company YPF SA, which started trading yesterday.

Concern about the economy was muted Monday by the drop in long-term interest rates to their lowest level in 16 years.

But yesterday morning, the Commerce Department said the Index of Leading Indicators fell 0.3 percent in May, the third drop in five months. The results were weaker than analysts' expectations of a 0.2 percent decline, according to a survey by Bloomberg Business News.

Also yesterday, the National Association of Realtors said sales of new single-family homes collapsed in May. The Conference Board, meanwhile, said consumer confidence dropped to 58.9 in June, from a revised 61.9 in May. Polled economists had expected confidence to rise to 62.9 in June.

"The economic news was a little gloomier than expected," said Jim Benning, a trader at BT Brokerage.

Against a background of sluggish growth, "people are starting to wonder what impact the Clinton economic plan will have on the economy," said Raymond Devoe, market strategist at Legg Mason Wood Walker in Baltimore. "I think it will be devastating, especially for small businesses."

The plan calls for federal taxes to rise for the fifth time in 11 years, Mr. Devoe said. Each time taxes have risen since 1982, "it's slowed the economy," and budget deficits were higher than ever as revenues failed to materialize, he said.

Bond prices, for instance, are rallying -- sending yields to record lows -- not because of anticipated deficit reductions but because investors see a growing chance of stagnation or sense the economy might slide back into recession, Mr. Devoe said. "We're getting low interest rates for the wrong reason," he said.

Yields on the benchmark U.S. Treasury 30-year bond inched up to 6.68 percent yesterday, from 6.67 percent Monday.

More ominously, "we're getting a smaller number of [stocks hitting] new highs," said Mr. Harrington of Interstate/Johnson Lane. "Not very many industries are giving any leadership, and even within the industries that are strong, only a few stocks are strong."

A move by Dell Computer Corp. to cut prices in Japan had investors bracing for another round of price wars -- and lower profits -- in the personal computer industry, traders said. Computer issues led the decline in the S&P 500 as Oppenheimer & Co. analyst James Poyner began coverage of Compaq and Dell yesterday with "sell" ratings.

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