Dow falls 51 as rising rates cause concern


February 25, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks plummeted yesterday as concerns about rising interest rates were compounded by the collapse of Tele-Communications Inc.'s merger with Bell Atlantic Corp.

Questions about the direction of rates grew after a report showed durable-goods orders last month were stronger than expected, fueling inflation concern, analysts said.

"Nervousness about interest rates and the breakdown of the TCI-Bell merger spooked investors," said Porter H. Sutro, director of equity management at Axe-Houghton Management, Rye Brook, N.Y.

The Dow Jones industrial average fell 51.78, to 3,839.90, led by shares of Caterpillar Inc., General Electric Co. and Allied Signal Inc. The average closed down 19.98 on Wednesday, at 3,891.68.

In the last hour of trading, the New York Stock Exchange's "uptick rule," aimed at curbing stock-index arbitrage, was set off after the Dow industrials had fallen more than 50 points.

In the broader market, the Standard & Poor's 500 Index fell 6.15, to 464.54, after falling Wednesday to 470.69, led by oil, financial and chemical companies.

The Nasdaq Combined Composite Index dropped 9.67, to 779.44, after falling 2.04 Wednesday. The index was hurt by telecommunications and software companies, including Microsoft Corp., down $1.125, at $79.875, and Oracle Systems Corp., down $1.125, at $32.375.

Trading was active, with almost 343 million shares changing hands, higher than the average 280 million shares traded daily over the past six months. More than five stocks fell for every one that rose on the Big Board.

The Commerce Department said durable-goods orders posted their largest gain since June, rising 3.7 percent in January.

"The numbers fell on the side of nudging interest rates up," said Steven Van Brunt, head trader at Nikko Securities International. "The stock market has basically been reacting to the bond market."

In testimony before Congress Tuesday, Federal Reserve Chairman Alan Greenspan said short-term rates are more likely to rise than fall. Mr. Greenspan also said durable-goods orders were an important indicator of inflation.

Investors were watching the report for further clues of the Fed's intention on rates. The yield on the 30-year Treasury bond rose to 6.74 percent, the highest level since June 23, 1993, from 6.64 percent Wednesday.

Shares of some telecommunications and media companies were lower after Bell Atlantic's $21.4 billion bid for TCI fell through.

"That is causing a bit of disturbance for the whole industry," said Don Hays, director of investment strategy at Wheat First Butcher & Singer. The S&P index of broadcast and media stocks fell 318.66, to 6,995.28.

The announcement yesterday came after the Federal Communications Commission's decision to mandate a 7 percent cut in basic cable rates, dampening enthusiasm for the industry's earnings.

TCI Class A shares fell $1.75, to $22.50, while its Class B stock fell $3.75, to $25; Bell Atlantic rose $1.875, to $54.625.

Shares of Comcast Corp. fell $1.125, to $19.375; Jones Intercable Investors fell $1.25, to $10.125; and Falcon Cable Systems Co. fell $1, to $11.75, after they were downgraded by Kidder, Peabody & Co. analyst Alan Gould.

Shares of makers of telecommunications-equipment also took a beating, with General Instrument's shares plunging $6.25, to $44.50; DSC Communications Corp. down $2.50, at $52.75; and Newbridge Networks Corp. down $2.625, at $54.875.

Associated Communications Corp.'s Class A shares slipped $1.625, to $24.50, after it agreed to sell its cellular telephone division to Southwestern Bell Corp. in a stock swap valued at $680 million. Southwestern Bell shares rose $1.125, to $38.625.

Maybelline Inc.'s shares rose $2.125, to $29.25, after the cosmetics company said it would buy back as many as 2.9 million of its common shares at $34 each.

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