Stocks steady as investors mull future Stronger economy balances worries about interest rates

March 29, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks were little changed yesterday, as investors debated whether a strengthening economy would help corporate earnings enough to offset an expected drag on profitability from higher interest rates.

Chemical, oil and auto shares rose as investors flocked to shares of companies that do best when the economy is booming. For some investors, signs of vitality in the economy mean that the 16-month rally in stock prices still has room to run.

The Dow Jones industrial average closed up 3.97 at 5,630.85, after falling 35.40 points earlier. Shares of Aluminum Co. of America, DuPont Co. and Minnesota Mining & Manufacturing Co. rose the most.

The 30-stock average slumped 43.72 points Wednesday, its biggest drop since March 8's 171-point slide.

Higher bond yields held stocks in check. The yield of the benchmark 30-year Treasury bond rose 4 basis points to 6.72 percent, after jumping 10 basis points Wednesday.

With yields on U.S. government bonds hovering near seven-month highs, analysts said investors may switch some of their assets from stocks to bonds.

Broad market indexes also were little changed. The Standard & Poor's 500 index finished up 0.03 at 648.94 after falling 2.55 points earlier. The Nasdaq composite index rose 0.95 to 1,094.83, rebounding from a loss of 4.11 points.

The Russell 2,000 index of small capitalization stocks rose 0.33 to 328.82; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, fell 5.13 to 6,379.28; the American Stock Exchange market value index fell 2.44 to 566.15; and the S&P 400 Midcap index slid 0.23 to 229.4.

Some 1,272 shares dropped and 1,053 rose on the New York Stock Exchange, where 368 million shares changed hands. The three-month daily average volume is 420 million shares.

Shares of auto and chemical companies gained for the same reason bond yields rose: the outlook for a stronger-than-expected economy. While robust growth could raise the risk of inflation -- a dreaded occurrence for bonds -- it would also spur earnings growth for companies that do best when the economy is booming.

The Morgan Stanley index of 30 cyclical stocks rose 0.78 to 382.07. General Motors Corp. rose 87.5 cents to $54.125 and Ford Motor Co. climbed 62.5 to $34.25.

Chemical companies got a further boost from Merrill Lynch & Co., which raised its investment opinion on Rohm & Haas Co. to intermediate-term "accumulate" from "neutral." Analyst Frank Mitsch said earnings growth should accelerate next quarter because specialty chemicals prices are rising along with demand.

Among the gainers, Eastman Chemical Co. gained $1.75 to $73, Dow Chemical Co. rose $1 to $86.625 and the American depositary receipts of Imperial Chemical Industries Plc gained 75 cents to $57.125. Rohm & Haas rose $2 to $68.625.

The Dow Jones transportation average rose 28.75 to 2,166.24 as the outlook for the economy improved. When growth is robust, more goods are shipped and business travel picks up.

Shares of UAL Corp., the parent of United Airlines, rose $5.25 to $207.50; Burlington Northern Santa Fe gained $1.875 to $83.25; and Federal Express Corp. climbed $1.75 to $71.375.

Cheyenne Software Inc. said it expects fiscal third-quarter net income will be between 10 cents and 18 cents a share, less than the 27 cents expected by analysts.

Cheyenne's shares tumbled $8.125 to $14.875. Earlier, the stock climbed $2.50 to $25.50 on speculation the company could be the target of a takeover.

CNBC-TV correspondent Dan Dorfman, citing "investment bankers," said Computer Associates International Inc. may buy Cheyenne for $35 a share.

After Cheyenne, yesterday's most active stocks in U.S. composite trading were Cisco Systems Inc., Sybase Inc., Bay Networks Inc. and Stop & Shop.

Pub Date: 3/29/96

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.