Dow falls 4.71 in seesaw session marked by interest-rate fears

October 26, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks closed lower yesterday for a fourth day, ending a seesaw session amid concern that interest rates are headed higher and that corporate earnings growth may slow next year.

The market's losses would have been worse were it not for gains in oil stocks such as Mobil Corp., Exxon Corp. and Texaco Inc., auto companies such as Chrysler Corp., and media companies such as Capital Cities/ABC Inc.

"It looks like the market doesn't want to do anything but slide," said Peter DaPuzzo, senior managing director at Cantor, Fitzgerald & Co. Concern about an "inevitable rise in interest rates" is creating a dearth of "people who want to have money in equities," he said.

The Dow Jones industrial average closed 4.71 lower, at 3,850.59, fueled by losses in International Paper Co., Minnesota Mining & Manufacturing Co. and Bethlehem Steel Corp. The average swung between an early 22.88-point decline, as rates rose and the dollar slumped, and a midday gain of 7.06 after a consumer confidence report suggested the economy might slow.

The broader market followed the same pattern, with the Standard & Poor's 500 Index rising 0.69, to 461.52, after sliding 2.57, then rising 1.12. The Nasdaq combined composite index, down all day, dropped 2.95, to 758.26, as Intel Corp., Oracle Systems Corp., MCI Communications Corp. all fell.

The Russell 2000 index of small stocks dropped 1.03, to 250.07, and the American Stock Exchange market value index eased 0.88, to 452.85.

More than seven stocks dropped in price for every four that rose on the New York Stock Exchange.

With yields on 30-year Treasury bonds closing above 8 percent for a second day, bonds are "going to become more attractive" to many stock market investors, Mr. DaPuzzo said.

Yields on 30-year Treasury bonds ended unchanged, at 8.04 percent, after earlier rising as high as 8.08 percent just before the National Association of Realtors said home resales rose 1.0 percent in September, to an annual rate of 3.97 million, raising concern about brisk economic growth. Economists had forecast a 0.3 percent decline.

The Federal Reserve Board is widely expected to raise rates for a sixth time this year in November, and "speculation is building" that the fed funds rate -- which banks charge each other for overnight loans, now 4.75 percent -- might increase by as much as one full point all at once, said Jack Baker, head of trading at Furman Selz Inc.

Today, the Commerce Department reports September durable goods orders, and on Friday it will release the initial estimate of third-quarter economic growth.

Bond yields have risen to the point where they're "too much competition for stocks," Mr. Baker said. "Investors are using any excuse to sell [stocks]."

Mobil Corp. jumped $3, to $83.25, after the company said it planned a large but unspecified number of layoffs around the world in the next year to curb its $2.5 billion in administrative expenses.

Other oil stocks also gained. Exxon Corp. rose $1, to $60.50; Amoco Corp. added $1, to $61; and Texaco Inc. gained $1.125, to $63.25.

Third-quarter earnings in the industry were "above expectations," said Dean Witter Reynolds analyst Eugene Nowak, who raised his opinion on Mobil to "buy" from "accumulate" yesterday.

Capital Cities/ABC spurted $1.375, to $79. The parent of the American Broadcasting Co. television network said third-quarter earnings leaped 71 percent, beating analysts' estimates. Auto stocks rebounded amid anticipation of Ford Motor Co.'s earnings and as General Motors Corp. Chief Executive Officer John Smith said cost-cutting efforts are only half-finished. Chrysler Corp. rose $1.625, to $47.50; Ford added 75 cents, to $29.375; and GM edged up 25 cents, to $41.25.

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