Stocks mixed as dip in drug issues offsets low rates Benchmark bond is down to 5.86%

WALL STREET

September 14, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks were mixed yesterday, as lingering optimism about low interest rates was countered by a decline among drug and health care issues.

"The market doesn't seem to want to go down, even though there are many reasons why the market should be down," said David Shulman, market analyst at Salomon Bros. Inc.

The Dow Jones industrial average rose 12.58, to 3,634.21, with shares of Du Pont and Minnesota Mining & Manufacturing Co. accounting for much of the gain. Advancing common stocks led declining issues by a narrow margin on the New York Stock Exchange.

The Standard & Poor's 500 Index rose 0.34, to 462.06, while the Nasdaq Combined Composite Index fell 3.99, to 740.32. The American Stock Exchange Market Value Index dropped 1.76, to 454.30.

Drug and health care issues stumbled on concern about President Clinton's plan to reform the nation's medical system.

Pfizer Inc. fell $1, to $60.375; Schering-Plough declined $1, to $60; and American Home Products Corp. lost 87.5 cents, to $61.625.

The stock market continued to get some help from the decline in interest rates, which are at the lowest level since the mid-1960s. Falling interest rates typically prompt investors to move more money into stocks, which offer the potential for higher returns, analysts said. Low interest rates have been driving the stock market for several months.

"It's clear that inflation pressures are low, and that's going to keep interest rates down and stock prices up," said Don Hays, investment strategist at Wheat First Butcher & Singer.

The yield on the benchmark 30-year Treasury bond closed at 5.86 percent, down from Friday's level of 5.87 percent. The decline was tied to the release of favorable inflation news and doubts about the strength of the economic recovery.

The Labor Department said Friday that U.S. wholesale prices fell 0.6 percent in August, the largest monthly decline in more than two years. The government is scheduled to release its report on consumer prices today. Economists estimate that consumer prices edged up 0.1 percent in August, according to a survey by Bloomberg Business News.

Meanwhile, analysts said they expected the Bank of Japan to cut interest rates. "There is still a lot of talk about lower interest rates in Japan and other countries," Mr. Hays said. That will give U.S. stocks a mild boost, as more money will shift into dollar-denominated assets, he said.

In the United States, analysts and fund managers were becoming less optimistic about the stock market's prospects.

"The stock market is soon going to start to overlook interest rates and focus on the economy," said William Raftery, market analyst at Smith Barney Shearson Inc. "When this happens, the stock market is going to fall."

Overall, the stock market is getting expensive, said Timothy Connors, managing director at Core States Investment Advisers Inc., which oversees $9 billion. For example, companies listed on the S&P 500 have an average dividend yield of 2.75 percent. "Any time the average yield is below 3 percent, it's a warning sign for the stock market," Mr. Connors said.

LTC Trading was moderate, as about 245 million shares changed hands on the NYSE.

Royal Dutch Petroleum Co., Cisco Systems, Paramount Communications, Hibernia Corp. and Western & Pacific Resources Corp. were the five most actively traded issues on the U.S. Composite.

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