Stocks decline in slow session Dow 30 loses 38 points

banks and utilities fall on interest rate worries

July 30, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks fell yesterday for the first time in three days amid concern that rising interest rates will curb corporate profits later this year. Shares of rate-sensitive banks and utilities were among the biggest losers.

The drop came on the slowest day of trading at the New York Stock Exchange this year, except for sessions shortened by bad weather or holidays. Investors refrained from taking big chances on stocks before tomorrow's release of the employment cost index, a report that will help shape expectations for inflation and rates.

The Dow Jones industrial average fell 38.47 to 5,434.59, with more than half of that drop coming in the last hour of trading. Shares of United Technologies Corp., Boeing Co. and General Electric Co. led the decline. The 30-stock average's slide followed its best back-to-back advance since late February.

About 281.6 million shares changed hands on the Big Board, below the three-month average of 400 million shares.

The Nasdaq composite index slid 12.97 to 1066.47, giving back much of Friday's 17.04-point gain. The Standard & Poor's 500 index dropped 4.99 to 630.91 as shares of GE fell $1.375 to $80.

The Keefe, Bruyette & Woods bank index of 24 stocks fell 2.25 to 425.80.

Shares of Chase Manhattan Corp. fell $1.25 to $67.875; Federal National Mortgage Association slid $1.25 to $30.75; Bank of Boston Corp. fell 50 cents to $52.375; Federal Home Loan Mortgage Corp. dropped $1.75 to $82.75; and Bank of New York Co. slid 25 cents to $50.25.

The Dow Jones utilities index slipped 1.89 to 205.42. Shares of utilities often rise and fall along with expectations for interest rates because the companies are among the biggest sellers of bonds.

Also, the stocks carry relatively high dividend yields which lose luster as rates rise.

Unicom Corp. fell 87.5 cents to $23.25; American Electric Power Co. slid 37.5 cents to $42; Consolidated Natural Gas Co. dropped 62.5 cents to $50.625; and Edison International fell 50 cents to $15.25.

W. R. Grace & Co. fell 12.5 cents to $62.50 despite reporting that second-quarter earnings from continuing operations rose 13 percent on cost-cutting efforts and increased sales of chemicals for construction profits.

Family Golf Centers Inc.'s stock fell $2.50 to $23 after an article in Barron's said the 2-year-old operator of golf centers is acquiring money-losing properties and competition is increasing.

One of the few bright spots on the day was Cal Fed Bancorp Inc., which jumped $1.25 to $22.625. First Nationwide Holdings Inc. agreed to acquire the parent of California Federal Bank for $23.50 a share, or $1.2 billion.

The Russell 2000 index of small capitalization stocks fell 1.45 to 313.12 yesterday; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, slumped 45.61 to 6174.67; the Amex market value index fell 3.03 to 536.12; and the S&P 400 midcap index slipped 2.01 to 217.77.

The slump in stocks came as bond yields soared.

The yield on the benchmark 30-year Treasury bond, a gauge of inflation expectations, rose 8 basis points to 7.09 percent -- the highest since July 9. Rising borrowing costs discourage companies and consumers from spending money, which hurts future profits.

Yesterday's most active stocks in U.S. composite trading were Intel Corp., Cisco Systems Inc., Sunglass Hut International Inc., Micron Technology Inc. and Sentex Sensing Technology Inc.

Shares of Sentex and other companies that make bomb-detection devices gained amid a growing public perception that security against terrorism in the U.S. needs to be increased after the crash of Trans World Airlines Inc.'s Flight 800 on July 17 and the bomb explosion early Saturday in Atlanta's Centennial Olympic Park.

Pub Date: 7/30/96

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