Lower rates buttress stocks Dow up 1

WALL STREET

October 09, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks rebounded yesterday from early declines as lower long-term interest rates offset concern about the strength of the economy.

A morning report on September employment wasn't strong enough for some investors concerned about corporate profits. "I think you're going to see more negative surprises than positive surprises" in third-quarter earnings, said Benedict Capaldi, managing director at Brandywine Asset Management in Wilmington, Del. "I just don't think the economy is strong enough."

On top of that, "a lot of the stocks that have been driving the market forward look very tired," said Mr. Capaldi, who helps manage a $1.8 billion portfolio. Specifically, he pointed to technology and financial issues.

The Dow Jones industrial average rose 1.11, to 3,584.74, after first jumping more than 12 points, to 3,596.2, and then sliding almost 26 points, to 3,558, amid computer-driven sell orders.

Broader stock indexes were slightly higher. The Standard & Poor's 500 Index gained 1.12, to 460.31, led by semiconductor, tobacco, media and oil stocks.

The Nasdaq Combined Composite Index rose 1.78, to 764.27, and the American Stock Exchange Market Value Index increased 0.75, to 464.70, a record for a third straight day.

Almost nine stocks advanced for every eight that declined on the New York Stock Exchange.

The Labor Department said yesterday morning that the economy added 156,000 jobs in September, higher than economists' average estimate of 138,000 but below some forecasts of as much as 225,000. The size of job losses in August was revised to 41,000 jobs from 39,000.

For the third quarter as a whole, jobs increased at an average of 117,000 each month, down from 179,000 in each month of the second quarter.

Traders said the nonfarm payroll report didn't signal a swift increase in growth that would drive up earnings enough to justify high stock prices. "I don't think this is a great number," largely because "a lot of growth is from government itself," said David Butler, head of equity trading at Kemper Financial Services in Chicago.

Government jobs rose 71,000 last month. "There were a lot of government numbers thrown in there, so [the report] was sort of skewed," said Mr. Capaldi. "The economy is no better off than it was a month or two ago." The unemployment rate, for instance, was unchanged, at 6.7 percent.

The announcement of unexpectedly weak profits from Advanced Micro Devices Inc. on Tuesday and a profit warning from Corning Inc. Thursday heightened concern about earnings this week.

That was compounded yesterday by PepsiCo Inc., which said it expects earnings to grow in the "low to mid-double digits" this year, below some analysts' estimates in the high teens. PepsiCo slid $1, to $38, before rebounding to $39.125, up 12.5 cents.

Long-term interest rates slid in reaction to the jobs report as bond investors decided economic growth wasn't accelerating, which would raise concern about inflation. The yield on the benchmark 30-year Treasury bond plunged to 5.92 percent from 6.01 percent Thursday as the price of the bond rose.

Volume on the New York Stock Exchange was moderate, at 244 million shares, down from 256 million Thursday.

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