Drug shares lead stocks' decline Dow off 5

WALL STREET

July 02, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks stumbled yesterday amid concern over the health of the economy and the strength of second-quarter corporate earnings, traders said. Drug shares led the day's decline.

Meanwhile, a rally in the price of gold, a traditional hedge against inflation, focused attention on the prospect that inflation -- and interest rates -- might rise.

"The economy's been sending out real mixed signals," said Barry Berman, head trader at Robert W. Baird & Co. in Milwaukee. "With the economy as weak as it is, people are concerned whether Clinton's plan to raise taxes and cut spending will push us into another recession."

Germany's decision to cut its key discount rate a half-point, to 6.75 percent, had little effect on financial markets.

"The rate cut in Europe was discounted already," said Peter Cardillo, of Westfalia Investments.

The Dow Jones industrial average fell 5.54 points, to 3,510.54, after sliding more than 12 points to a session low of 3,503.62. The decline was led by United Technologies, which was down $1.25, at $52.75.

Among broad market indexes, the Standard & Poor's 500-Stock Index was 1.53 lower, at 449.0. The Nasdaq Combined Composite Index was down 0.36, at 703.59.

Advancing common stocks outpaced decliners about 10-to-7 on the New York Stock Exchange. Volume was active, with 292 million shares changing hands on the Big Board.

Shares retreated after a National Association of Purchasing Managers report showed a drop in manufacturing activity. The association's index fell to 48.3 in June, the lowest since December 1991.

The purchasing managers' report confirmed investor skepticism about the economic recovery. "With all the announcements made earlier in the week on top of this one, people are saying the economy is really slow," said Dale Tills, manager of institutional equities trading at Charles Schwab. Weak economic figures prompted investors to cash in this week's advance, he said.

On Tuesday, the Conference Board said its consumer confidence index fell three points, to 58.9, in June, the lowest level in eight months, and new-home sales in May plunged 21 percent, the biggest decline in 13 years. Wednesday, the

Commerce Department said factory orders declined 1.4 percent May, the third consecutive monthly loss.

Concern about the economy is acute in advance of today's June employment report, traders said.

If job growth is too strong, investors might start to anticipate an increase in interest rates to choke inflation, said Mr. Berman of Robert W. Baird. "If it looks too weak, then people might think we're heading into another recession."

Investors are also concerned about the latest set of corporate profits, which companies will start to report in the middle of July.

Meanwhile, inflation concerns were highlighted by yesterday's $9-an-ounce increase in the price of gold, to $388.20, on the New York Commodity Exchange, and 4.5 percent rise in the Standard & Poor's Gold Index.

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