Stocks close mixed as long-term interest rates rise

February 09, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks closed mixed yesterday as a rally i semiconductor stocks offset a rise in long-term interest rates to a six-month high.

Stocks also got a boost as better-than-expected earnings from AlliedSignal Inc. pushed up the stock of companies, such as Caterpillar Inc.,that perform best as the economy strengthens, and as Britain lowered a key interest rate.

Patrick Moriarty, chief investment officer at Bank Julius Baer, said he is "very bullish" about U.S. stocks until April. The Federal Reserve's move Friday to raise interest rates "is out of the way. It's highly unlikely they'll do so again in the next two months."

The Dow Jones industrial average fell 0.29, to 3,906.03, as Sears, Roebuck & Co. announced weaker-than-expected fourth-quarter profits. Sears dropped $3.25, to $47.75, outweighing gains in AlliedSignal Inc., up $1.50, to $77.375, and Caterpillar, up $2.75, to $108.

The broader Standard & Poor's 500 Index dropped 0.71, to 471.05, hurt by falling drug and retail stocks. Pfizer Inc., down $2.25, to $59.25, told analysts this year's earnings may not match the most optimistic forecasts.

MA Schering-Plough Corp. fell $1.625, to $60.75, and Merck & Co.

dropped 62.5 cents, to $34.50.

The Nasdaq Combined Composite Index gained 3.50, to 782.70, boosted by Intel Corp. Intel stock rose $1.50, to $63.50, benefiting from expectations of a strong report on January chip orders.

Almost five stocks rose for every four that fell on the New York Stock Exchange, where volume declined to 318 million shares from 347 million Monday.

Stocks were lower for most of the day amid concern that this week's quarterly refunding by the Treasury will drive up interest rates.

The refunding tends to cause a rise in U.S. interest rates, often resulting in lower stock prices, said Peter Cardillo, research director at Westfalia Investments Inc. "The same will likely occur this week."

Yesterday's sale of $17 billion in three-year notes, at an average yield of 4.83 percent, the highest in more than a year, contributed to losses in the bond market.

The sale was the first leg of the quarterly refunding, involving the sale of a record $40 billion of debt.

Long-term interest rates, as reflected in the yield on the 30-year Treasury bond, climbed to 6.45 percent from 6.39 percent Monday, the highest since Aug. 12.

The sale of debt continues today with the sale of $12 billion o10-year notes and ends tomorrow with the sale of $11 billion of 29 1/2 -year bonds.

Stocks were helped earlier in the session after the Bank of England lowered its minimum lending rate a quarter point, to 5.25 percent, raising confidence that other countries will cut rates and stimulate their economies.

European markets rallied on news of the rate cut in Britain London's FT-SE 100 Index gained 0.70 percent, Paris' CAC 40 Index advanced 0.56 percent, and Germany's DAX index climbed 1.34 percent.

Spectrum Information Technologies Inc., RJR Nabisco Holdings Corp., Sears, American Power Conversion and Intel were the day's most active U.S. stocks.

Semiconductors rallied amid anticipation that the monthly survey orders would show chip demand rose in January.

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