Auto stocks' dip holds market down

January 27, 1995|By Bloomberg Business News

NEW YORK -- U.S. stocks closed mixed yesterday, as a swoon in automakers' shares offset a stream of strong fourth-quarter earnings and a flurry of takeover activity.

The auto stocks' decline countered strength in beverage, drug and food issues.

Shares of General Motors Corp., Ford Motor Co. and Chrysler Corp. approached their lowest prices in a year.

"This industry has had a phenomenal recovery over the last couple of years, and now there's concern it's hitting a peak in NTC pricing and production," said David Butler, director of equity trading at Kemper Financial Services Inc. in Chicago, which manages about $68 billion.

The Dow Jones industrial average, led by GM, closed down 1.01, at 3,870.44, after dropping as much as 18.17 points. GM fell $1.50, to $37.625, nearing its one-year low of $36.125, set in November.

Auto shares also constrained the advance in the Standard & Poor's 500 index, which closed up 0.88, at 468.32, after rising as much as 1.18. Ford dropped 62.5 cents, to $25.50, and Chrysler slid $1.50, to $45.

The Nasdaq composite index declined 3.42, to 757.56, after rising as much as 1.34 earlier.

Two influential Wall Street analysts, Jack Kirnan of Salomon Brothers Inc. and Maryann Keller of Furman Selz Inc., reduced their earnings estimates for automakers in the past week amid signs that sales are slowing and consumers are balking at paying high prices for some popular models.

Advancing stocks were even with decliners on the New York Stock Exchange. Trading was brisk, with about 312 million shares changing hands on the Big Board.

Auto shares fell as rising interest rates halted mortgage refinancings,drying up extra income that helped fuel the car-sales boom. Rising rates also boost lease and car-loan interest costs, discouraging some buyers.

Signs that rising interest rates are taking their toll came with recent announcements of Ford's plan to curb some vehicle production and Chrysler's increased use of rebates. Many traders interpreted those as harbingers of a slowdown.

Gentex Corp., a maker of rearview mirrors that posted weaker-than-expected fourth-quarter earnings, tumbled $3.125, to $22.75. Among other auto-parts makers, Magna International Inc. fell $1.50, to $36.25, and Eaton Corp. fell 75 cents, to $47.75.

Steel producers also slumped amid concern about less vehicle production. Bethlehem Steel Corp. fell 25 cents, to $16.75; Inland Steel Industries Inc. fell $1.625, to $30.50; Nucor Corp. fell 25 cents, to $56.50; and USX-U.S. Steel Group fell $1.375, to $34.25.

The declines spearheaded a general drop in cyclicals, companies such as aluminum and chemical makers, whose profits rise and fall with the economy and interest rates.

Offsetting the weakness in cyclicals was a parade of robust fourth-quarter profit reports, many from noncyclical companies, along with takeover bids for Affymax N.V., Dr Pepper/Seven Up Cos. Inc. and Hillhaven Corp., traders said.

Affymax NV rocketed $11.50, to $29.50, after the Dutch biotech company received a takeover offer from Glaxo Holdings PLC for $30 a share, or $485 million.

Glaxo's offer, which Affymax's board of directors recommended to shareholders, lifted other biotech stocks by rekindling speculation about acquisitions in the industry.

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