Dow falls 25.71 as Kodak tumbles on weak outlook

December 16, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks closed lower yesterday as a plunge in Eastman Kodak Co. shares offset optimism arising from approval of a world trade accord under the General Agreement on Tariffs and Trade.

Concern about interest rates also depressed the market, outweighing evidence the economy is improving, traders said.

The Dow Jones industrial average tumbled 25.71, to 3,716.92, led by Kodak, Goodyear Tire & Rubber Co., and Aluminum Co. of America. The average set a record 3,764.43 on Monday.

Broader indexes finished mixed. On the New York Stock Exchange, 10 stocks declined for every seven that rose.

The approval of a GATT accord didn't boost stocks because people expected an agreement to be reached, traders and analysts said.

"I don't know anybody who thought they wouldn't come to some agreement on GATT," said David Prickril, who manages about $300 million for Glenmede Trust Co. "There's too much political capital being expended around the world."

Standard & Poor's 500 Index fell 1.22, to 461.84. The Nasdaq Combined Composite Index broke a seven-session slump to close up 1.50, at 752.97, led by Intel Corp. Intel rose $1.50, to $59, after Duff & Phelps and Morgan Stanley recommended the stock.

Trading was active, with about 331 million shares changing hands on the Big Board. People were preparing for tomorrow's quarterly expiration of stock-index options and futures and options on individual stocks, traders said.

"We'll have a pretty boring market until then," said Dale Tills, manager of institutional equities trading at Charles Schwab & Co.

Kodak, the most actively traded U.S. stock, plummeted $7.25, to $55.50, in NYSE composite trading of 11.6 million shares. The stock sank after the new chief executive, George Fisher, said 1994 earnings would be substantially below Wall Street estimates. Mr. Fisher was recruited from Motorola Inc. this year to replace Kay Whitmore after several years of restructuring efforts failed to bolster earnings.

"I was never convinced, restructuring aside, that they would be able to generate top-line growth," said Glenmede's Mr. Prickril. "Photography is a good business, but it's a mature business, and they're already the leader." In a low-inflation environment, he said, it's harder to raise prices to spur growth.

Meanwhile, concern about rising interest rates weighed on stocks. The yield on the benchmark 30-year Treasury bond rose as high as 6.30 percent, up 2 basis points from Tuesday.

Rates are rising as evidence mounts the economy is strengthening and as commodity prices reach their highest point in three years. The concern is that an improving economy would fuel an increase in the inflation rate.

"I don't see any big push up in rates," said Eugene Peroni, market analyst at Janney Montgomery Scott Inc. "It's more the fear of that than the reality."

The Federal Reserve said yesterday that output of the nation's factories, mines, and utilities increased 0.9 percent in November, the largest gain in a year. Also, the Commerce Department said business inventories were unchanged in October, while total business sales climbed 0.4 percent.

Meantime, the Commodity Research Bureau spot index of 21 commodity prices gained about half a point, to 224.65, shy of Friday's three-year closing high of 224.8.

Among other Dow components, Minnesota Mining & Manufacturing closed up $1.375, at $111.75. The multinational manufacturing company's stock rose amid optimism about the GATT outcome, traders said.

Kodak, Amway Asia Pacific Ltd., TIG Holdings Inc., Koll Real Estate Group Inc. and Limited Inc. were the most actively traded U.S. stocks.

Because the end of the year is approaching, "portfolio managers have two more weeks" to cash in gains from their best performers or sell losers to cut their tax bills, said Mr. Prickril of Glenmede. "Whatever happens between now and the end of the year, I wouldn't put much store in it."

Amway Asia Pacific closed at $28.625, well above the initial public offering price of $18. The company is the Asian arm of household-products distributor Amway Corp.

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