Stocks fall on news of higher prices

March 16, 1995|By Bloomberg Business News

NEW YORK -- U.S. stocks slipped yesterday, one day after setting records, as a decline in Goodyear Tire & Rubber Co. hurt the Dow Jones industrial average and a loss by Motorola Inc. led technology stocks lower.

Stocks got off to a weak start after the Commerce Department reported February wholesale prices rose more than expected and the dollar tumbled again vs. the German mark and Japanese yen.

Even so, investors said the economy remains strong, a good sign for stocks. "There's only one thing wrong with the market today," said Thom Brown, money manager at $270 million Rutherford, Brown & Catherwood Inc. in Philadelphia. "The producer price index number gave traders a fit of 'overbought indigestion' " after stocks' large gains this year, he said.

On Tuesday, U.S. stocks surged to record highs amid increased confidence that corporate earnings will keep expanding as long as economic growth stays moderate and inflation low. So far this year, the Standard & Poor's 500 stock index has gained 7.1 percent, the Nasdaq composite index is ahead 7.37 percent and the Dow Jones industrial average has rallied 5.32 percent.

The Dow industrials closed down 10.38, at 4,038.37, after dropping as much as 19.71. Declines in General Electric Co., Minnesota Mining & Manufacturing Co. and Boeing Co. added to the loss.

The broader market measures eased as well.

The Standard & Poor's 500 index dropped 1.01, to 491.88, after falling as much as 2.06, hurt by declines in electrical equipment, semiconductor, computer software, oil and restaurant and auto issues.

The Nasdaq composite index shed 0.86, to 807.38, after briefly dropping as much as 3.4. Microsoft Corp., DSC Communications Corp., Oracle Systems Corp., Intel Corp. and Tele-Communications Inc. paced the decline. The Russell 2,000 index of small stocks rose 0.13, to 257.39.

More than 11 common stocks dropped for every 10 that rose on the New York Stock Exchange.

Trading on the exchange totaled 337.1 million shares, compared with this year's average of 330.8 million.

Motorola Inc., down $1.75, to $56.875, hurt technology stocks after Comcast Corp. awarded a $200 million cellular equipment order to AT&T Corp. instead of Motorola. DSC Communications Corp., down $2.625, to $35.875, supplies Motorola with digital switches for cellular systems. AT&T was unchanged, at $52.125.

Goodyear fell 87.5 cents, to $35, after China Tire Holdings Ltd. filed a $1 billion lawsuit. China Tire accused Goodyear of robbing it of its stake in a plant in northern China.

Union Carbide Corp. gained $1.125, to $29.75, after it said its earnings will surpass expectations, bolstering investor optimism about the strength of corporate profits.

Carbide said first-quarter earnings will total more than $1.10 a share, exceeding analysts' estimate of 96 cents and last year's 39 cents.

Another chemical maker, Olin Corp., rose $1.125, to $50.375. Merrill Lynch & Co. increased its first-quarter earnings estimate to $1.40 a share from $1.20 and raised its 1995 estimate to $6.00 from $5.20.

That sort of profit performance means stocks "will bounce back soon," said Rutherford's Mr. Brown. Even if stocks suffer further losses later this week, "next week we'll be up again," he said.

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