Stocks close mixed, as long-term interest rates drop

WALL STREET

August 27, 1993|By Bloomberg Business News

NEW YORK -- Stocks closed mixed yesterday as long-term interest rates fell to new lows and declining computer networking stocks drove down the index of over-the-counter stocks, traders and analysts said.

Meanwhile, investors reacted calmly to the German central bank's unexpected decision to leave interest rates unchanged, traders said.

"The attitude is [Germany] didn't cut this time, which is a disappointment, but they're going to have to eventually, because the economy is weak," said Barry Berman, head trader at Robert W. Baird & Co. in Milwaukee. "So they'll cut the next time [the Bundesbank council meets], and as long as things are in place for them to ease, there's hope" European economies will recover, he said.

The Dow Jones industrial average, hurt by declines in International Paper Co. and Philip Morris Cos., fell 3.91, to 3,648.18, only its second decline in the past eight sessions. The Standard & Poor's 500 Index gained 0.91 to a record 461.04, after closing at a record 460.13 yesterday.

The Nasdaq Combined Composite Index fell 2.27, to 731.39, led by declines in computer networking and software stocks such as Novell Inc., Microsoft Corp., Oracle Systems Corp., and Cisco Systems Inc. The Nasdaq hit a record high of 735.14 on Tuesday.

Trading on the Big Board was active with 254 million shares changing hands. Advancing common stocks on the New York Stock Exchange led decliners by less than 8-to-7.

Stocks gained support from surging U.S. Treasury bond prices. When rates drop, stocks become more attractive investments compared with fixed-income securities.

The yield on the benchmark 30-year Treasury bond dropped to a record 6.09 percent, down 8 basis points, or hundredths of a percentage point, from the prior mark of 6.17 percent set Wednesday. "There's a great deal of optimism over low interest rates, and we're continuing to see money move into equities," said Alan Ackerman, executive vice president at Reich & Co.

Low rates have given "an upward bias in the [stock] market," but the recent budget accord in Congress, with its increased taxes on consumers and businesses, partly offsets such optimism, Mr. Ackerman said.

Stock market investors reacted negatively to a Labor Department report yesterday morning that weekly claims for jobless benefits rose for the first time in four weeks, though the four-week moving average of claims fell to its lowest level since September 1989. "Higher unemployment filings this morning got things going," Mr. Berman said.

Still, the figure pointed to "decent job gains in the months ahead and is consistent with a second-half rebound in economic

growth," Merrill Lynch & Co. economist Bruce Steinberg said in a report.

News that the Clinton administration will ban U.S. exports of almost $500 million in high-technology goods to China in protest over arms sales to Pakistan also hurt investor sentiment, said James Andrews, first vice president in charge of institutional trading at Janney Montgomery Scott in Philadelphia.

Novell Inc. was yesterday's most actively traded stock, leading a host of companies in the computer software and networking industries.

Novell fell $2.125, to $19.125, after the maker of networking software reported lower-than-expected third-quarter earnings, prompting analysts at Bear Stearns and First Boston to temper their enthusiasm for the stock.

The drop in Novell triggered declines in other companies in the networking industry, including 3Com Corp. and SynOptics Communications Inc. Novell is a bellwether for this group because it's the largest maker of networking software.

3Com rallied to close unchanged at $26.50, after sliding $1.125 at one stage, and SynOptics fell $1.125, to $29.125.

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