Dow rises 4.04, but most stocks fall

January 04, 1995|By Bloomberg Business News

NEW YORK -- Most U.S. stocks fell yesterday, the first trading day of the new year, as higher interest rates hurt stocks of businesses that are closely tied to swings in the economy.

Machinery distributor W. W. Grainger Inc., retailer Dayton-Hudson Corp. and software maker Autodesk Inc. led the decline amid concern that corporate earnings and the economy will both slow in 1995.

The Dow Jones industrial average rose 4.04, to 3,838.48, as 14 of its 30 stocks gained. Advances in Sears, Roebuck & Co., Eastman Kodak Co. and Woolworth Corp. outweighed losses in Aluminum Co. of America, Union Carbide Corp. and General Motors Corp.

Broader market indexes showed losses in a majority of stocks. The Standard & Poor's 500 index fell 0.36, to 458.91. Software, retail, semiconductor, gold and auto stocks were among the biggest decliners.

The Nasdaq combined composite index slumped as much as 8.38, to 743.58, as Microsoft Inc., Oracle Systems Corp., Cisco Systems Inc., U.S. Healthcare Inc. and Nextel Communications Inc. declined.

Almost 12 stocks fell in price for every 11 that advanced on the New York Stock Exchange, where volume reached 263.1 million, up from 257.7 million on Friday. The market was closed Monday for the New Year's holiday.

"Stocks may not be the investment of choice" in the next few months, Frederick Taylor, chief investment officer at $32 billion U.S. Trust Co. told clients yesterday. "Any signs of another economic slowdown" could damage stock prices, he said.

The Dow industrials' gain was fueled largely by Sears, which spurted $1.50, to $47.50, amid optimism about Christmas sales.

Kodak added 50 cents, to $48.25. The film maker closed the $1.55 billion sales of its household products unit to Britain's Reckitt & Colman Plc and said it's in talks to sell as much as $75 million worth of photocopiers to International Business Machines Corp., brightening the outlook for its flagging copier business.

Woolworth added 37.5 cents, to $15.375, after rising as high as $16.125. Morgan Stanley & Co. director of U.S. portfolio strategy Byron Wien named the retailer one of four "surprise picks to do well" in 1995.

The Nasdaq composite index fell 1.12 percent, compared with a 0.03 percent loss in the S&P 500, as key stocks tumbled.

Nextel Communications Inc. sank $2, to $12.375. The Wall Street Journal reported the Rutherford, N.J.-based wireless radio company may be worth $6 to $7 a share solely as a radio dispatch company, while Forbes magazine reported that the Short On Value newsletter recommended investors bet on Nextel con

tinuing to fall.

Nordstrom Inc. slumped $1.25, to $40.75. December retail sales are likely to be weaker than expected when released tomorrow, Merrill Lynch & Co. analyst Daniel Barry told clients yesterday.

"Promotions were the name of the game this year as retailers were compelled to offer promotions that in some cases were greater than they had expected," Mr. Barry wrote. "Because of the heavy promotional activity, profits will be under pressure."

Meanwhile, Viewlogic Systems Inc. sank $8.75, to $9.75.

Share prices declined largely in reaction to questions about the extent to which higher rates will slow corporate earnings growth in 1995, traders and analysts said.

Yesterday, government bond yields rose for a fourth day amid concern that inflation will accelerate. Yields on 30-year Treasury bonds jumped to 7.92 percent from 7.88 percent last Friday and a recent low of 7.76 percent on Dec. 27.

American depositary receipts issued by Mexican companies' slumped in tandem with the Mexican peso.

Telefonos de Mexico SA fell $2.375, to $38.625; Coca-Cola Femsa SA lost $2.625, to $22.25; Grupo Televisa SA dropped $2, to $29.75; and Vitro Sociedad Aninima declined $1, to $13.

Among closed-end mutual funds, Emerging Mexico Fund Inc. declined $1.25, to $11.50.

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