Stocks close mixed on interest rate fears Dow sets record

WALL STREET

December 08, 1993|By Bloomberg Business News

NEW YORK -- Stocks closed mixed yesterday, as rallies in big industrial companies like Boeing Co. and Bethlehem Steel Corp. were undercut by concern about a potential rise in interest rates.

The Dow Jones industrial average climbed 8.67, to a record 3,718.88, thanks to gains in Boeing, Bethlehem Steel, and Sears, Roebuck & Co., companies whose earnings hinge on an expanding economy. The previous high was 3,710.77, set Nov. 16.

The Standard & Poor's 500 Index added 0.33, to 466.76, while the Nasdaq Combined Composite declined 1.74, to 769.35, after falling 1.13 Monday.

"I think people are upbeat about the economy," said Richard Meyer, head of institutional trading at Ladenburg, Thalmann & Co. At the same time, he said, interest rates have "moved up," giving investors cause for concern.

Confidence in the economic recovery was bolstered by Friday's report from the Labor Department that showed the unemployment rate fell to a three-year low in November.

Among the Dow industrials, Boeing rallied $2.125, to $41, after a Salomon Bros. analyst, George Shapiro, recommended it for purchase for the first time in three years. Boeing rose as high as $41.50, a 52-week high.

Sears rose $2.125, to $54.25. "Sears has been one of the great stocks of the year," said Edward Laux, head trader at Kidder, Peabody & Co.

The optimism surrounding Boeing reflected replacement cycles for commercial airplanes more than a cyclical improvement in the broad economy, said Thomas McManus, associate strategist in U.S. equities at Morgan Stanley & Co. "The commercial-airplane cycle is not necessarily the same cycle most of the economy is on."

Bethlehem Steel gained 87.5 cents, to $17.50. The steel company was raised to "buy" from "hold" by Prudential Securities analyst Clarence J. Morrison.

Advancing stocks were about even with decliners on the New York Stock Exchange. Trading was active, with about 285 million shares changing hands on the Big Board.

Pollution control shares were among the biggest gainers in the S&P 500 after a Prudential Securities analyst, Vishnu Swarup, raised his ratings and earnings estimates for Browning-Ferris Inc. and WMX Technologies Inc. Browning-Ferris rose $1.375, to $27.25, and WMX closed $1.625 higher, at $27.50.

Long-distance telephone companies were among the session's biggest decliners. Sprint Corp. fell 87.5 cents, to $32.375, and MCI Communications Corp. went down 37.5 cents, to $25, amid concern that Ameritech Corp., one of the seven regional telephone companies, was seeking to enter the long-distance market. Ameritech rose 12.5 cents, to $78.875.

Concern about rising interest rates resurfaced two days before the Labor Department was scheduled to release the producer price report for November, a key barometer of inflation. The PPI will be followed by the consumer price report on Friday.

The yield on the benchmark 30-year bond rose as high as 6.20 percent yesterday, from 6.17 percent late Monday, after Mr. Mullins' remarks led some investors to worry that the Fed might move to raise interest rates.

Intel Corp., CompuMed Inc., RJR Nabisco Holdings Corp., Cellstar Corp., and Novell Inc. were the most actively traded stocks.

Intel dipped 12.5 cents, to $59.375, after sliding $4 Monday on negative comments from a Merrill Lynch & Co. analyst.

RJR Nabisco advanced 25 cents, to $6.50. The tobacco and food maker announced plans to cut 6,000 jobs and take a $445 million charge.

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