Program trades cited as Dow slips 3.88

September 01, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks closed mixed yesterday as computer-driven sell orders killed a rally that began when Philip Morris Cos. said it would buy back $6 billion worth of stock and raise its dividend.

The sell orders, which kicked in at 3:25 p.m., wiped 15 points off the Dow Jones industrial average and 1.50 points from the Standard & Poor's 500 index, according to Birinyi Associates Inc., a Greenwich, Conn., research and money-management firm.

The Dow Jones industrial average closed down 3.88, at 3,913.42, its first decline since a 16.84 drop last Thursday. Before the computer-driven selling started, the Dow industrials were up as much as 22.02. Philip Morris, which will raise its dividend almost 20 percent, paced the gain, rising $2.375, to $60.875.

The tobacco and food company's stock buyback announcement follows similar actions by PepsiCo Inc. and CBS Inc. within the past two weeks. The three repurchase programs bolstered the idea that stocks are undervalued, analysts said.

"It's just the latest bit of confidence being shown by management" in its own stock, said Robert Stovall, president of Stovall/Twenty-First Advisers, a money-management and arbitrage firm that supervises about $1 billion. "Management is voting with its dollars and its shares. They think stocks are good values."

Among the Dow industrials, gains in shares of Philip Morris, Sears, Roebuck & Co. and Aluminum Co. of America were offset by losses in General Motors Corp., International Business Machines Corp. and Texaco Inc. Since Aug. 22, the average is up 162.2 points, or 4.3 percent. Yesterday's close of 3,917.30 was the average's highest close since Feb. 17 and its first above 3,900 since Feb. 22.

The Standard & Poor's 500 index fell 0.59, to 475.5, after earlier rising as much as 1.50. Gains in shares of tobacco, aerospace/defense and oil companies offset losses in auto, semiconductor and computer issues.

The Nasdaq combined composite index dropped 0.84, to 765.62, ending a six-day rally in which it rose 3.2 percent. Intel Corp., Cisco Systems Inc., Oracle Systems Corp. and Amgen Inc. were the biggest losers.

Advancing stocks outpaced decliners 4-to-3 on the New York Stock Exchange, where about 365.6 million shares traded hands, the most since 373 million shares were traded on June 17. The three-month daily average is 262 million shares.

Rising speculation about a pickup in mergers and acquisitions are helping stocks, analysts and traders said. On Tuesday, Lockheed Corp. and Martin Marietta Corp. agreed to a $10 billion stock-swap.

Among other mergers this year, American Home Products Corp. made a $9.7 billion bid for American Cyanamid Co. and Mellon Bank Corp. purchased Dreyfus Corp. for $1.8 billion.

"There's still a lot of merger and acquisition activity, and that seems to be energizing the market place," said James Solloway, director of research at Argus Research Corp.

Technology issues slumped yesterday. Texas Instruments Inc. tumbled $4.625, to $77.875, after a Japanese court ruled that computer maker Fujitsu Ltd. did not infringe on a 30-year-old patent for semiconductor design owned by Texas Instruments. If the ruling is upheld after appeals, other Japanese companies could stop paying royalties to TI.

Among other technology companies, shares of Intel Corp. fell $1.25, to $65.75; Micron Technology Inc. sank $3.25, to $40.25; and Advanced Micro Devices Inc. lost 37.5 cents, to $29.

Automakers also lagged. Shares of Chrysler Corp., the nation's No. 3 car company, slumped $1.50, to $48. The company's insiders sold 146,000 shares for $7 million late last month, amid concern that the stock's rally may be over, the Wall Street Journal reported. Shares of GM, up about 7.4 percent since Aug. 22, slid $1.625, to $50.375. Ford Motor Co.'s shares lost $1.25, to $29.375.

Stocks fell in early trading amid concern that share prices rose too fast in the past week and won't be able to hold their gains, analysts said.

A slumping bond market contributed to the decline in stocks. Bonds fell early in the day after a report showing an increase in prices paid by manufacturers gave rise to worries that inflation may not be under control.

The Purchasing Management Association of Chicago said its index of prices paid by manufacturers rose to 79.3 in August, from 71.9 in July. The benchmark 30 1/4 -year bond's yield rose as high as 7.50 percent during the day before settling at 7.45 percent, down 1 basis point from Tuesday.

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