Stocks again close mixed Dow up 0.28 Concern over profits, higher rates is factor

WALL STREET

September 30, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks ended mixed yesterday for a second straight day amid concern about the strength of third-quarter earnings and the health of the economy.

"I think there are going to be positive earnings surprises in the computer industry and negative surprises everywhere else," said Chris McClellan, head trader at Robertson, Stephens & Co. "The economy is worse than anybody wants to admit."

The Dow Jones industrial average gained just 0.28, to 3,566.30, though oil shares rallied. Among other measures, the Nasdaq Combined Composite Index fell for the first time in more than a week, closing 0.49 lower, at 763.17.

The Standard & Poor's 500 Index fell 1.41, to 460.12, and the American Stock Exchange Market Value Index rose 0.53, to 457.65. Declining common stocks led advancing issues by a narrow margin on the New York Stock Exchange.

Trading was active, with about 278 million shares changing hands on the New York Stock Exchange.

Stocks were held back somewhat yesterday by concern about a rise in long-term interest rates, said Phil Smyth, market analyst at Birinyi Associates Inc. The yield on the 30-year Treasury bond was at 5.99 percent, up from a low of 5.93 percent earlier in the session.

Rates were higher yesterday as investors tried to gauge the strength of the economic recovery, said Grace Messner, a vice president at Wilmington Trust Co. who manages a $36 million all-stock fund.

Statistics on unemployment claims, August home sales and personal income and spending are scheduled for release today. Tomorrow's calendar of reports includes the National Association of Purchasing Managers Index for September, the University of Michigan consumer sentiment index and leading indicators and factory orders for August.

The Commerce Department said yesterday that the economy expanded at a lackluster 1.9 percent annual rate in the second quarter. But the latest estimate was stronger than expected. Economists had expected a 1.7 percent gain in the three-month period ended June 30, according to a survey by Bloomberg Business News.

"I think business conditions in the U.S. are improving," said Byron Wien, chief investment strategist at Morgan Stanley & Co. "I think the stock market has further to rise."

Others weren't so sure. Investors' confidence in third-quarter earnings was shaken Tuesday when Warner-Lambert Co. warned that its quarterly earnings would drop because of regulatory problems at its drug-making plants.

Such leading companies as Eastman Kodak Co., Westinghouse Electric Corp., Whirlpool Corp. and Tenneco Inc. earlier warned that quarterly earnings would be below investors' expectations.

Still, analysts forecast that the average U.S. company would report that net income rose 22 percent in the third quarter from last year's level, according to Institutional Brokers Estimate System Inc., a unit of Citicorp. The increase mostly reflects cost-cutting steps that companies took in recent years.

Meantime, concern about the situation in Russia ought to keep a lid on the stock market, traders said.

"Russia is a concern of ours," said Edward Collins, executive vice president of institutional trading at Daiwa Securities America. "If military tensions erupt, it raises many questions about who is in control of the nuclear weapons."

Spectrum Information Technologies Inc., Intel Corp., Lady Luck Gaming Corp., Cisco Systems Inc. and Novell Inc. were the five most active issues on the U.S. Composite.

Shares of international and domestic oil producers soared on reports that the Organization of Petroleum Exporting Countries reached an agreement limiting crude output to 24.5 million barrels per day, a drop of 200,000 barrels from current production. Oil for November delivery rose 71 cents a barrel, to $18.67, the highest close since Aug. 30.

Chevron Corp. rose $2.50, to $97; Amoco Corp. gained $2.375, to $57.75; Mobil Corp. advanced $1.375, to $81.50; and Atlantic Richfield Co. rose $4.25, to $116.125.

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