Dow climbs 10.62 to set record high But HMO stocks take a beating

WALL STREET

August 12, 1993|By Bloomberg Business News

Stocks hit new highs yesterday, amid signs of falling interest rates worldwide and brisk demand at the Treasury's note auction.

But stocks of several health maintenance organizations plummeted in heavy trading yesterday as worries mounted over the shape of President Clinton's health reform package.

The Dow Jones industrial average closed at an all-time high for the second time this week, gaining 10.62 points to 3,583.35. The old high of 3,576.08 was set Monday.

Among broader market measures, Standard & Poor's 500 Index, which declined 1.27 Tuesday, climbed 1.01 points to 450.46, paced by general retail stores, semiconductors, beverages and foods.

The Nasdaq Combined Composite Index, led by semiconductor giant Intel Corp., gained 1.69 points to a record 718.77, squeaking past its old high of 718.49, also reached on Monday.

A draft of some of Mr. Clinton's health care plan's key features has been circulating within the investment community for the past several weeks. Kimberly Purvis, an analyst with Donaldson, Lufkin & Jenrette, used the draft as a basis for downgrading a bevy of HMO stocks in an investment report the securities firm issued yesterday.

Among the hardest hit was Oxford Health Plans, a fast-growing company that operates in the New York City market and has been recommended by several investment firms as a stock worth buying. Its shares plunged $11, to $60 a piece, in over-the-counter trading.

Elsewhere, Humana fell 75 cents, to $10.75; US Healthcare lost $4.625, to $41.75 and United Healthcare tumbled $6, to $53.50.

Stocks opened higher following rallies in European stock markets and a report showing semiconductor sales remained robust in July, breaking the traditional pattern of summer sluggishness. U.S. shares got a further boost late in the day, when the Treasury's sale of $16.5 billion in 10-year notes drew brisk demand.

"The 10-year auction went very well," said Richard Ciardullo, head of trading at Eagle Asset Management. Bond yields dropped to a record 6.42 percent after the auction results were reported, marking the third straight day the yield has hit a record low.

Meanwhile, major European stock markets rallied after the Bank of France cut a key interest rate, spurring expectations that other European countries will follow suit, traders said.

Lower interest rates are viewed as good for stocks because they stimulate economic activity and make equities more attractive than fixed-rate investments.

"The belief is maybe these economies overseas will start picking up, and that bodes well for multinational U.S. companies," Mr. Ciardullo said.

The rallies in Europe followed a surge in Japanese stocks overnight. Tokyo's Nikkei 225 Index rose for the third session in a row, closing up 238.82 at 20,732.57 amid expectations that the Bank of Japan will cut the official discount rate soon.

Pacing the gain in the broader market, semiconductor stocks gained after the Semiconductor Industry Association, a trade group for the chip industry, said its book-to-bill ratio rose to 1.12 in July from a revised 1.11 in June.

That means chip makers got $112 worth of new orders for every $100 worth of products shipped last month.

Intel Corp. rose $1.875, to $58.75, Motorola Inc. gained $1.375, to $96.375, Advanced Micro Devices Corp. climbed $1.25, to $29.625, and Texas Instruments Inc. advanced 75 cents, to $77.25.

Semiconductor sales are considered a barometer of industrial activity because chips are used in applications ranging from computers to machine tools, autos and telephones.

Advancers led decliners by a margin of 9-to-7 among common stocks on the New York Stock Exchange. Trading was brisk, with 268.3 million shares changing hands on the Big Board.

The gain in stocks was tempered by investors' reluctance to make big bets before today's producer price report and tomorrow's consumer price index report, traders said.

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