Dow falls 8 despite good inflation news

WALL STREET

July 14, 1993|By Bloomberg Business News

NEW YORK -- Stocks fell yesterday for the first time in five sessions, as slumps in stocks of household product and international oil companies led the market lower.

The decline in stocks was tempered by optimism about low inflation and low interest rates.

The Dow Jones industrial average fell 8.94 points, to 3,515.44. The Dow's slide was led by Procter & Gamble Co., which slumped $1.50, to $51.50, after the company announced plans to cut laundry and cleaning products by up to 15 percent.

The Standard & Poor's 500 Index lost 0.89, to 448.09. Advancing common stocks outnumbered declining issues by a slim margin on the New York Stock Exchange. Trading was moderate, with about 237 million shares changing hands.

The Nasdaq Combined Composite Index bucked the trend, rising 0.80, to 708.47. The Nasdaq composite closed just below its record high of 708.85, set Feb. 4. The American Stock Exchange Market Value Index gained 1.01, to 439.11.

"It was a pretty mixed day in the market, but we saw some stock groups really get hammered," said Mark Donahoe, managing director at Piper Jaffray Inc.

Oil stocks slumped after an analyst at Salomon Brothers, Bill Randol, cut his investment ratings on Texaco, Mobil and Chevron because of concern about falling oil prices. Crude prices have fallen 13 percent since late April, to $18.15 a barrel, and it is possible that prices will fall further if Iraq begins exporting oil again, Mr. Randol said. Mobil lost 75 cents, to $70.875; Chevron declined 50 cents, to $84.50; and Texaco gained 12.5 cents, to $62.875.

Telephone issues were weak, led by a decline in shares of Nynex Corp. The company said its New York telephone unit has been accused by the state attorney general's office of illegally trying to make consumers pay for $2.6 million in charitable contributions and legal fees in 1992. Nynex's stock fell $1.125, to $90.125.

The slide in the stock market was less severe than it might have been because of the Labor Department's report that producer prices declined 0.3 percent last month, the biggest drop in more than two years. The report means that inflation is under control and that the Federal Reserve Board is less likely to raise interest rates, said David Cohen, an economist at MMS International.

So long as interest rates stay down, stocks are unlikely to fall very far, said Daniel Marciano, a senior trader at Dillon, Read & Co. The yield on the 30-year Treasury bond hit an all-time low of 6.61 percent yesterday, before closing at 6.62 percent. As bond yields decline, stocks become more attractive relative to fixed-income securities like bonds.

The financial markets will be subject to more inflation news today, when the Labor Department will release the consumer price index for June. Analysts estimate that consumer prices rose 0.1 percent last month.

"Everybody's waiting for the CPI before they're convinced inflation isn't a problem," Mr. Marciano said.

Legent Corp. fell $10.125, to $17.75, with a heavy 9.77 million shares traded. The software company, confirming market speculation that had driven its stock lower, said late Monday that it expected third-quarter earnings of 26 cents a share, down from 38 cents a year ago.

Shares of Medco Containment rose $1.375, to $30.125, after the company said it had discussed a possible merger with unidentified partners. The Wall Street Journal reported that Merck had held discussions to buy Medco. Executives at Merck, the Journal reported, were in disagreement about whether such a transaction made sense.

Home Shopping Network Inc. gained $1.125, to $14.75. QVC Network Inc. offered Monday to merge with Home Shopping in a stock swap. QVC's stock rose $3.75, to $71.50.

Andrea Electronics Corp. rallied $3.50, to $42. On Monday, Andrea signed its first distribution agreement for its noise-reduction products.

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