Computer-driven orders undercut stocks rally Dow falls again, off 11.44

October 01, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks closed mixed yesterday after computer-guided sell orders buffeted the Dow Jones industrial average in the final half-hour, causing the average to register its second straight decline.

"With the quarter ending, people unload some of the losers just to get them off their books," said Jeffrey Rubin, an analyst at Birinyi Associates Inc. in Greenwich, Conn.

The computer-driven orders shaved 17 points off the average, undercutting a rally in Philip Morris Cos. that led the Dow to a 20.85-point gain earlier yesterday.

The average closed at 3,843.19, down 11.44 points for the day, the same amount it gained for the week. For the third quarter, the average advanced 218.23 points, or 6 percent.

Stocks took their direction yesterday from developments in trade talks aimed at narrowing Japan's $60-billion trade surplus with the United States, traders said. Last night was the deadline for an agreement that would avert U.S. sanctions. Reports that a partial agreement was reached helped the dollar and bonds rally, bolstering stocks for much of the session.

Progress in the trade talks helped offset a report showing growth in the economy may be robust enough to prompt the Federal Reserve to raise interest rates as early as October.

"A trade agreement is good for stocks because it takes away barriers on the flow of funds," said Todd Clark, senior director in equity trading at Mabon Securities Corp. "The fear is if we decide to slap trade sanctions on Japan, how can we talk about GATT?"

What's more, "without a trade agreement, you get a weaker dollar, and that drives interest rates higher," said Barry Berman, head trader at Robert W. Baird & Co. Japanese exporters sell dollars for yen when they bring profits back home, driving down the U.S. currency.

Among broader market measures, the Standard & Poor's 500 index rose 0.48, to 462.71, after dropping 2.58 Thursday. The Nasdaq combined composite index climbed 4.95, to 764.29, after slipping 0.66 Thursday.

MCI Communications Corp., leading the Nasdaq's advance, rose to $25.625, after British Telecommunications PLC completed its $4.3 billion purchase of a 20 percent stake in MCI.

Three stocks rose for every two that declined on the New York Stock Exchange. Trading was active, with about 296 million shares changing hands on the Big Board.

Philip Morris rallied $1.125, to $61.125. The company is expected to sell its Kraft food-service business and some smaller units for as much as $1 billion in an effort to bolster returns and restore investor confidence in the company.

Stocks also were buoyed by a firm bond market. Bonds also got a boost from news that an index of prices paid by Chicago-area manufacturers dropped this month, suggesting inflation may be subdued. The yield on the benchmark 30 1/4 -year bond fell to 7.81 percent from 7.84 percent Thursday.

The Chicago purchasing managers report offset a Commerce Department report that showed consumer spending increased a larger-than-expected 0.9 percent in August amid strong demand for autos.

The increase in spending, the largest since February, is another sign that the Fed may raise interest rates in the next six weeks to control inflation, analysts said.

U.S. stocks dropped Thursday as reports of economic growth fueled concern that accelerating inflation will push up rates. Higher rates slow the economy and crimp corporate earnings.

Anheuser-Busch Cos. dropped $1.125, to $50.875. The maker of beer and snack foods was dropped from Goldman, Sachs & Co.'s recommended-for-purchase list by analyst Marc Cohen, on concern about beer sales.

Cheyenne Software Inc. fell 87.5 cents, to $9.25. The company said slow sales and higher expenses will keep fiscal first-quarter earnings from meeting analyst expectations.

Allegheny & Western Energy Corp. soared $1.875, to $10.625. The oil and gas company said it received a $12-a-share merger offer and said consummation of the transaction is conditioned partly on shareholder approval.

The company didn't disclose the suitor's name.

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