Stocks close mixed Dow drops 6.15

WALL STREET

September 02, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks closed mixed yesterday after a series of weak economic reports stirred doubt about the strength of the recovery, offsetting continued low interest rates, money managers and analysts said.

Low rates contribute to a longer recovery, cut the costs of financing for companies and coax investors to seek higher returns in stocks instead of cash deposits.

"The undergirding of the market is the rate structure," said Larry Wachtel, market analyst at Prudential Securities. "There is this confidence that the economy is slack enough that we're not really going to have a problem with rates."

Led by a slide in Eastman Kodak Co. and International Paper Co., the Dow Jones industrial average dropped 6.15 points to 3,645.10 after falling to 3,638.40 in the wake of declines in European and Asian stock markets.

Advancing common stocks outpaced decliners by less than 8 to 7 on the New York Stock Exchange, where volume totaled 246.6 million shares.

The Standard & Poor's 500 Index fell 0.41 to 463.15, led by drug, soft drink and semiconductor stocks. The Nasdaq Combined Composite Index closed at another record high of 746.15, up 3.31, driven by gains in Microsoft Corp., Oracle Systems Corp., MCI Communications Corp. and Sun Microsystems Inc.

The decline in blue-chip stocks was no surprise after the market's record gains in the past six weeks, said George Wild, portfolio manager at Merchants Capital Management Inc. in Indianapolis.

"Given that the economic news isn't overwhelmingly bullish and that overseas markets were weak," Mr. Wild said, he was "still impressed" that the broad market was unchanged to slightly higher.

The outlook for stocks in the next two weeks, however, isn't positive, Mr. Wild said. "Bonds and stocks are a little tired and should have a little bit of a pullback."

Reports yesterday on personal income and construction spending, plus a weak purchasing manager's index for August, reinforced recent "mixed economic news," said Alan Ackerman, executive vice president and market analyst at Reich & Co.

"The big concern is over jobs and consumer confidence, and the more concern there is over jobs, the less likely it is that consumers will open their pocketbooks," Mr. Ackerman said.

In the wake of yesterday's reports showing a fragile recovery, the yield on the benchmark 30-year Treasury bond returned to Tuesday's level of 6.08 percent after earlier rising to 6.11 percent. When rates drop, stocks become more attractive investments compared to fixed-income securities.

"There's no fundamental change in the economics to cause interest rates to go up, or inflation to rise," said Barry Berman, head trader at Robert W. Baird & Co. in Milwaukee. "I don't think this is anything to get too upset about," he said.

The economic reports were evidence of a weak economy and "give a favorable background" for the long bond to soon reach a yield of 6 percent, said Richard Ciardullo, research director at Eagle Asset Management in St. Petersburg, Fla.

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