Led by auto shares, stocks fall for 2nd day Dow sheds 12.78

January 21, 1995|By Bloomberg Business News

NEW YORK -- U.S. stocks, led by auto shares, fell for a second day amid concern the Federal Reserve will raise interest rates later this month, slowing the economy and curtailing corporate earnings growth.

Chrysler Corp. fell $2.125, to $47.125; Ford Motor Co. dropped $1.125, to $26.375, and General Motors Corp. lost 75 cents, to $39.50. Automakers' profits are sensitive to swings in the economy and to increases in interest rates.

"The sense of peaking earnings momentum is starting to be realized by investors," said Peter Canoni, director of equity research at Aeltus Investment Management Inc.

The Dow Jones industrial average fell 12.78, to 3,869.43, its lowest close in more than a week. The average fell as much as 34.36 points at midday, due in part to a round of computer-guided sales that trimmed 10.43 points off the Dow industrials, Birinyi Associates Inc said. The Dow industrials fell 39.03 points, or 1 percent, for the week. It was the worst showing since a 1.5 percent decline in the week that ended Dec. 9.

Shares of Caterpillar Inc., Aluminum Co. of America, International Paper Co., Boeing Co. and GM -- so-called cyclical stocks, which rise and fall along with the economy -- were among the biggest decliners in the Dow. The Morgan Stanley cyclical index of 30 stocks fell 4.29, to 295.59, its lowest since Jan. 5.

Among broader market indexes, the Standard & Poor's 500 index fell for a third straight day, losing 2.17, to 464.78, after shedding 2.76 points Thursday. The Nasdaq composite index, which includes a large number of technology issues, fell 6.50, to 762.05.

Financial stocks fell amid concern that rising rates would squeeze profit margins for brokerage firms, banks and insurance companies. Thursday, Morgan Stanley & Co. said fourth-quarter earnings would fall "substantially" below third-quarter results, and Bear Stearns Cos. said fiscal second-quarter earnings dropped 76 percent.

"You're getting a lot of bad reports out there," said Ronald Hill, investment strategist at Brown Bros. Harriman & Co. Morgan Stanley shares tumbled $3.875, to $59, and Bear Stearns shares lost 37.5 cents, to $16.50.

Shares of Salomon Bros. Inc. dropped $1.25, to $37.625; Merrill Lynch & Co. shed 87.5 cents, to $36.375; Bankers Trust New York Corp. eased 50 cents, to $57.25; and American International Group fell $1, to $100.125.

Declining stocks outpaced advancers by about 2-to-1 on the New York Stock Exchange, where about 378 million shares traded hands. It was the most active day since 378.8 million shares traded on Dec. 21.

Analysts and traders attributed the heavy volume to yesterday's "double witching," when options on U.S. stock indexes and options on individual stocks simultaneously expire.

The Russell 2000 index of small-capitalization stocks fell 1.37, to 249.64; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock markets, slid 20.19, to 4,595.99; and the AMEX market value index dropped 1.89, to 437.64.

Shares of Sybase Inc. tumbled $4.75, to $47.50, just one of many technology stocks to wilt even though earnings beat expectations. Apple Computer Inc. said its fiscal first-quarter net income more than quadrupled, but the company's stock slid $3.25, to $42.625.

The earnings reports haven't been good enough to quell concern that businesses will stop buying computers if the economy slows, said David Bostian, investment strategist at The Bostian Group, a division of Herzog, Heine, Geduld Inc.

"Technology is still capital equipment, and that's not totally insensitive to economic cycles," he said.

Compaq Computer Corp. fell $1.125, to $41.75; Digital Equipment Corp. lost $1.375, to $34.25; Data General Corp. lost $1.75, to $9.125; Computer Sciences Corp. dropped $1.25, to $48; Microsoft weakened $1.875, to $61.625; and Advanced Micro Devices Inc. eased 62.5 cents, to $31.375.

Oil stocks were among the few bright spots yesterday. Oil for delivery in March rose 6 cents, to $18.42 a barrel, and stock traders speculated that the price won't now drop much below that.

Shares of Texaco Inc. rose 87.5 cents, to $62; Exxon Corp. jumped 62.5 cents, to $62.75; Chevron Corp. added 62.5 cents, to $46.25; and Mobil Corp. gained 37.5 cents, to $85.125.

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