NEW YORK -- U.S. stocks closed mixed yesterday as losses in drug shares offset a gain in food shares triggered by a $2.6 billion takeover agreement for Pet Inc.
Semiconductor shares also rose, amid signs of brisk European sales and anticipation of Motorola Inc.'s fourth-quarter earnings, due for release later yesterday.
Drug companies fell along with other consumer-products shares as investors flocked to so-called cyclical stocks, such as automobiles and paper producers, which are expected to show better earnings growth this year, analysts said. The Morgan Stanley cyclical index is up 3.3 percent in the first week of 1995. The Morgan Stanley consumer index, by contrast, is down almost 1 percent.
"Cyclicals have more to gain in a year of good earnings and they trade a little bit cheaper because their prospective earnings are less certain," said Thomas McManus, associate strategist in U.S. equities at Morgan Stanley & Co. That makes them more attractive to some investors, he said.
The Dow Jones industrial average, which outpaced broader indexes last week, lagged yesterday. The average closed down 6.06, at 3,861.35, after rising 16.49 on Friday. Union Carbide Corp., Coca-Cola Co. and Merck & Co. led the decline.
The broader Standard & Poor's 500 index rose 0.15, to 460.83. Drugs were among the biggest decliners, while semiconductor and food shares were the largest gainers.
Leading yesterday's decline, Merck & Co. shed 75 cents, to $36.75; Johnson & Johnson fell 62.5 cents, to $53.75; Pfizer Inc. eased $1.625, to $74.625; and Upjohn Co. slipped 37.5 cents, to $30.50.
Coca-Cola fell 75 cents, to $49.625, closing below $50 for the first time since Dec. 12.
The Nasdaq composite index, led by Intel Corp., Oracle Corp. and Cisco Systems Inc., rose 2.40, to 752.09, extending Friday's 4.03-point rise.
Food shares were among the biggest gainers in the S&P 500 index, largely reflecting a 28 percent surge in shares of Pet. The maker of Old El Paso Mexican foods agreed to be acquired by Britain's Grand Metropolitan PLC for $26 a share, or $2.64 billion, capping more than a year of takeover speculation. The price was 29 percent higher than Pet's closing price Friday.
Pet shares rocketed $5.375, to $25.50, as almost 16 million shares traded, making it the most actively traded stock yesterday.
The agreement spurred active trading, albeit with less dramatic gains, in other food stocks viewed as potential takeover candidates. That was partly because other, bigger food companies would be much harder to swallow than Pet, analysts said.
H. J. Heinz, which rose as much as $2.125, to $39.375, later retreated to close up 75 cents, at $39. Quaker Oats Co. rose $1.125, to $32.125; and CPC International Inc. added 12.5 cents, to $51.875.
Dr Pepper/Seven Up Cos. rose $1.125, to $26.50, amid renewed talk that 25 percent shareholder Cadbury Schweppes PLC might buy the rest of the company.
Semiconductor, auto and paper shares also gained, helping to buoy the market.
Intel gained $1, to $66, and Advanced Micro Devices Inc., which posted better-than-expected earnings Friday, closed up $1, at $28.875. Intel and AMD are discussing a settlement of a seven-year dispute over cloning Intel's microprocessors, the Wall Street Journal reported. Motorola rose 75 cents, to $58.75, and Texas Instruments Inc. went up 37.5 cents, to $71.625.
Chip stocks rose after Dataquest, a research firm, said the European chip market grew at a stronger-than-expected rate of almost 30 percent in 1994, surpassing $20 billion in sales for the first time.
Eleven stocks rose for every 10 that fell on the New York Stock Exchange. Trading was the second-slowest so far this year, with about 279 million shares changing hands.