Dow sets 2nd straight record broad indexes fall on inflation fears

December 09, 1993|By Bloomberg Business News

NEW YORK -- The Dow Jones industrial average set a record for a second day, buoyed by shares of Aluminum Co. of America and J. P. Morgan & Co., which accounted for two-thirds of the average's advance.

The broader market indexes fell on concern about today's release of a key inflation report. Shares of computer software and international oil companies led the decline.

"Some suspect inflation may be more of a problem than conventional wisdom says it is," said William Raftery, market analyst at Smith Barney Shearson Inc.

The Dow Jones industrial average closed 15.65 points higher, at a record 3,734.53.

The Standard & Poor's 500 Index fell 0.47, to 466.29, and the Nasdaq Combined Composite Index declined 1.46, to 767.89. The American Stock Exchange Market Value Index gained 1.47, to an all-time high of 468.87.

The number of declining common stocks narrowly led advancing issues on the New York Stock Exchange. Computer software stocks were among the biggest losers after an analyst at Goldman, Sachs & Co. cut his earnings estimates for Microsoft Corp. The stock slumped $2, to $83.50.

Shares of international oil companies declined on concern about a plunge in crude prices to the lowest levels in five years. Crude prices fell on reports about rising inventories and little hope the Organization of Petroleum Exporting Countries would take any immediate steps to cut production.

Exxon Corp. fell 37.5 cents, to $62.25; Mobil Corp. declined $1.625, to $73.625; Chevron Corp. fell $1, to $86; and Amoco Corp. lost $1, to $52.125.

"The decline in oil prices eases concern about inflation, but it simultaneously raises concern about the profit outlook for this industry," said James Solloway, research director at Argus Research.

This morning, the Labor Department is set to release the first of two monthly inflation reports. Economists surveyed by Bloomberg Business News estimate that producer prices were unchanged in November and rose 0.2 percent, excluding food and energy prices.

"Everyone has their eye on inflation and interest rates," said Thom Brown, managing director at Rutherford, Brown & Catherwood Inc., which manages $270 million.

Federal Reserve Vice Chairman David Mullins said Tuesday that the Fed might raise short-term interest rates next year as the economy gains momentum. "I am not opposed to growth," he said. "I am opposed to inflation."

Mr. Mullins' comments revived concern about rising rates, Mr. Brown said. "If inflation exceeds expectations, rates will rise, and stocks will fall," he said.

The yield on the benchmark 30-year Treasury bond was at 6.16 percent late yesterday, up from its record low of 5.77 percent, set Oct. 15.

Trading on the New York Stock Exchange was active, with about 314 million shares changing hands. Vodafone Group Plc, Gateway 2000 Inc., Pacific Gas & Electric Co., Telefonos de Mexico S.A. and MCI Communications Corp. were the five most actively traded stocks on the U.S. Composite.

J. P. Morgan & Co. gained $1.50, to $72.75. The bank raised its quarterly dividend to 68 cents a share from 60 cents, and said it would buy back as much as 7 million of its outstanding shares.

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