Rate worries offset rally in oil stocks

April 15, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks closed little changed yesterday as nagging concern that the Federal Reserve will push interest rates higher to curb inflation offset a bounce in oil companies' shares.

"It is only a matter of time before the Fed raises rates again, and few investors are anxious to be bold," said Eric T. Miller, chief investment officer at Donaldson, Lufkin & Jenrette Securities Corp.

The Dow Jones industrial average closed 1.78 higher, at 3,663.25, after seesawing throughout much of the day. The advance was led by Chevron Corp, which rose $2.375, to $88.375, and Exxon Corp., up 1.125 cents, to $62.875, as crude oil prices rose to their highest level since October.

"Crude prices rose, and that gave some people an excuse to buy oil stocks," said Edward Laux, head trader at Kidder, Peabody & Co.

Sweet crude for delivery in May, the most active contract, rose 26 cents, to $16.23 a barrel. Prices jumped after an erroneous report said Iraqi jets shot down two U.S. helicopters in northern Iraq, raising concern that resumption of the country's oil exports would be delayed. The choppers were mistakenly shot down by two U.S. jets.

Standard & Poor's 500 index rose 0.12, to 446.38. The index was boosted by gains in oil stocks, including Atlantic Richfield Co., up $2.75, at $99; and Amerada Hess Corp., up $1.25, to $46.625.

The Nasdaq combined composite index slipped 0.07, to 727.31, after falling 11.84 on Wednesday. Gains in many technology companies were largely offset by a drop in Intel Corp., the stock with the largest capitalization in the index.

The stock market continued to parrot movements in interest rates today.

The yield on the benchmark 30-year Treasury bond rose to 7.29 percent, up from 7.26 percent at Wednesday's close.

Separately, Merrill Lynch & Co., the nation's largest brokerage, dampened investors' enthusiasm by paring the stocks in its "aggressive" portfolio model to 55 percent from 60 percent and raising the cash portion to 20 percent from 15 percent.

"The problems for equities go beyond higher interest rates and mutual fund liquidations," Charles Clough, Merrill's chief investment strategist, wrote in a report. "Earnings are about to slow."

Among companies reporting lower-than-expected earnings yesterday were Wickes Lumber Co., Boise Cascade Corp., Crosscomm Corp., Dekalb Genetics Corp., Schulman Inc. and Bausch & Lomb Inc.

Ten stocks fell for every seven that rose on the New York Stock Exchange. Trading was moderate, with 270 million shares changing hands by 4 p.m. on the Big Board.

The most active stocks were Intel, Long Island Bancorp, National Medical Enterprises, Cisco Systems Corp. and Airtouch Communications.

Intel shares fell $3.875, to $59.875, after International Business Machines Corp. and Cyrix Corp. signed a five-year agreement for IBM to make and sell Cyrix X86 microprocessors, which compete with Intel chips. That prompted Prudential Securities to cut Intel to a "hold" investment rating from "buy."

Intel's X86 microprocessors are the brains of more than 85 percent of the world's computers. Shares of IBM rose $1.50, to $53.875. Cyrix rose $2.75, to $29.25.

In general, though, "technology stocks are starting to look very attractive here as a result of the sell-off earlier in the week," said James Solloway, director of research at Argus Research. Disappointing earnings from Motorola Inc. and an industry report showing weak demand for semiconductors triggered a fall in technology-related shares Tuesday.

Adobe Systems rose $1.875, to $23.75, after the software maker was raised to "buy" at SoundView Financial Group. LSI Logic Corp., also rated "buy" at SoundView, rose 50 cents, to $18.50.

Parametric Technology Corp., a software maker, rose $1.25, to $26.75, after earning 27 cents a share in the second quarter, up from 17 cents a year earlier.

Shares of Lotus Development Corp. rose $2.625, at $65.625. The company said it was considering a stock split and may seek approval from shareholders to issue more stock when making acquisitions, according to Securities and Exchange Commission filings.

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