Stocks close mixed Dow up 13.39

May 04, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks closed mixed yesterday as tobacco and semiconductor issues retreated, offsetting gains among health care stocks.

"The market has a lot to worry about," including Friday's government report on April employment and the May 17 meeting of the Federal Reserve's policy-making council, said Richard Ciardullo, head trader at Eagle Asset Management in St. Petersburg, Fla.

"I think it's a given that the Fed is going to do more tightening" and raise interest rates another notch, he said.

The Dow Jones industrial average staged a late rally, rising 13.39, to 3,714.41, as Eastman Kodak Co. surged after announcing plans to sell its Sterling Winthrop drug unit and two other divisions. The Dow industrials gained for a third straight day, despite a bond market slump.

Other health care stocks climbed as SmithKline Beecham PLC's U.S. unit agreed to buy part of United HealthCare Corp. for $2.3 billion, one day after Switzerland's Roche Holdings AG offered to buy Syntex Corp. for $24 a share, or $5.3 billion.

In the broader market, the Standard & Poor's 500 index was little changed, rising 0.02, to 453.04. The Nasdaq combined composite index dropped 1.31, to 739.37, paced by declines in Intel Corp., Microsoft Corp., Oracle Systems Corp. and Cisco Systems Inc.

More than 11 stocks fell for every 10 that advanced on the New York Stock Exchange.

Tobacco stocks fell amid reports that companies may face greater liability in Florida for the cost of treating smoking-related ailments, if Gov. Lawton Chiles signs legislation making it easier for the state to recover an estimated $1 billion annually in Medicaid costs.

Philip Morris Cos. fell 62.5 cents, to $53.375.

Technology shares slid on reports that Intel Corp. and Motorola Inc. are cutting semiconductor prices.

"There's some pricing problems within the industry," and questions whether other companies will have to follow suit and lower prices, said David Butler, head of equity trading at Kemper Financial Services in Chicago. "Intel's pricing problems are dragging down the whole group."

Intel fell $1.125, to $59.375; Texas Instruments Inc. fell $2.25, to $76.125; Advanced Micro Devices dropped 87.5 cents, to $25.875; and Motorola fell 25 cents, to $43.625. Applied Materials Inc. fell $1.75, to $44.50.

Meanwhile, bond prices fell for a fourth straight day, further weakening stocks, which become less attractive as interest rates rise.

Interest rates rose after the Commerce Department said its March index of leading economic indicators rose 0.7 percent, the eighth straight month without a decline.

The increase was a bit more than economists' forecast of 0.6 percent, and it sent yields on the 30-year Treasury bond as high as 7.38 percent, up from 7.33 percent yesterday, before they settled at 7.34 percent.

Stocks had opened slightly higher as Kodak announced plans to sell its Sterling drug, L&F Products and clinical diagnostic divisions to focus on its imaging business, including photographic film, and as SmithKline agreed to buy United HealthCare's prescription-drug management unit.

Roche's proposed buyout, plus the Kodak spinoffs, renew speculation about large mergers and acquisitions in the drug industry and elsewhere, said Leon Brand, global market specialist at NatWest Securities.

The premium Roche is paying for Syntex could mean "a lot of stocks are cheap," Mr. Brand said.

Kodak rose $1.375, to $46.125. SmithKline American depositary receipts, each of which represent five equity units, rose 12.5 cents, to $29.25, and Syntex was unchanged, at $23.50.

Value Health Inc., which agreed with Pfizer Inc. to develop ways to increase Pfizer's sales through networks of managed health care providers, surged $3.25, to $44.25. Pfizer fell 12.5 cents, to $61.

Utility stocks, among the most sensitive to interest rates, fell in reaction to the bond market's decline.

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