NEW YORK -- Stocks closed mixed yesterday amid a rise in government bond yields and concern that rallies in overseas markets are siphoning away cash.
The market failed to get a boost from a European-wide decline in interest rates as Germany's central bank lowered its key lending rates yesterday. Slower profit growth at Microsoft Corp., a bellwether technology stock, also raised concern that third-quarter corporate profits would not meet expectations.
Some investors might be "pulling money out of here to put" in Europe, said Bill Beise, a partner at Wessels, Arnold & Henderson in Minneapolis.
Telephone, oil, utility, chemical, electrical equipment and financial stocks were among the big losers.
The Dow Jones industrial average dropped 8.94 points, to 3,636.16, after having risen as high as 3,656. Price declines in shares of American Telephone & Telegraph Co., AlliedSignal Inc. and Minnesota Mining and Manufacturing Co. offset gains in Caterpillar Inc., International Business Machines Corp. and Sears, Roebuck and Co.
The Standard & Poor's 500 Index fell 0.71, to 465.36, its fourth straight decline.
The Nasdaq Combined Composite Index broke a string of three losses, rising 3.03, to 771.28, led by Intel Corp., Novell Inc., MCI Communications Corp. and Apple Computer Inc.
Declining common stocks on the New York Stock Exchange exceeded advancing issues by a margin of about 10-to-9. Trading was active, with about 290 million shares changing hands.
The weakness in stocks was limited by a drop in German interest rates that set off a round of rate reductions throughout Europe and sent British, Spanish, Dutch and Swiss stocks to record highs.
Germany's half-point cut in its discount rate, to 5.75 percent, "was a surprise," said Alan Ackerman, executive vice president at Reich & Co. "This is probably a bromide for what's been a sleepy European economy, heavily depressed by unemployment."
Italy, Switzerland, the Netherlands, Belgium and Austria followed the German central bank's move by cutting their own rates. Lower European rates will eventually help economies there recover, boosting demand for U.S. exports. But Germany's action alone was not enough to send U.S. stocks higher.
Rising long-term interest rates, which make fixed-income securities more attractive than stocks, also hurt prices yesterday.
The yield on the 30-year Treasury bond climbed to 5.91 percent, from 5.82 percent Wednesday, after a report suggested that the economy was gaining strength. The Federal Reserve Bank of Philadelphia said its October index of manufacturing conditions rose to 15.1, from 0.7 in September.
"Bonds aren't supporting [stocks] at all, and it's hard to get a consistent message from the [earnings and economic] news that is coming out," said Dale Tills, manager of institutional equities trading at Charles Schwab Corp. in San Francisco.
"That's what's concerning everybody: There's so much information that's not giving you a clear idea of the macroeconomic trends."
Offsetting the Philadelphia Fed report, for instance, was a government report yesterday that said the number of workers filing new applications for unemployment benefits rose 6,000 last week, to a seasonally adjusted 350,000, the highest level since July.
"We seem to be having a hard time keeping the momentum going forward," Mr. Tills said.
Microsoft reported that its fiscal first-quarter earnings rose 14 percent -- "somewhat disappointing" for a company whose profits had been growing 35 percent to 50 percent, said Peter DaPuzzo, senior managing director at Cantor, Fitzgerald & Co.
Microsoft dropped $1.50, to $79.50, after having slid as low as $78. "Microsoft's a high-profile name," said Mr. Beise of Wessels, Arnold. "That set the tone for some of the other technology stocks," although most rallied to close higher after early losses.
"Bad news is being exaggerated, and good news is ignored," Mr. DaPuzzo said. "That's usually a sign of a market that's going to break down."
Apple Computer Inc. rose $2.50, to $30.25. The personal-computer maker introduced more-powerful desktop and portable models, priced up to 35 percent below current machines.
Tandy Corp. surged $3.125, to $38.75. The parent of Radio Shack electronics stores said its third-quarter earnings rose to 52 cents a share, from 40 cents, exceeding analysts' median estimate of 45 cents.
Computer Associates International Inc. climbed $5.125, to $38.25. The software designer's stock was upgraded at Oppenheimer & Co. after it said its fiscal second-quarter earnings rose to 51 cents a share, from 28 cents.
Gillette Co. rose 87.5 cents, to $61. The razor maker said its third-quarter earnings rose to 65 cents a share, from 58 cents, matching analysts' forecasts.
Salomon Inc. eased $1.875, to $45.125. The securities firm said it earned 1 cent a share in the third quarter, reversing a year-earlier 9-cent loss, but far below analysts' estimate of $1.54 a share.
Dow Chemical Co. sagged $2.50, to $56.375. The company's third-quarter net income fell to 50 cents a share, from 55 cents last year.