Stocks tumble on rate worries Dow industrials drop 57 points, to 5,647

tobacco shares weak

August 14, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks posted their biggest drop in a month yesterday as a surge in bond yields raised concern that the Federal Reserve might raise interest rates next week. Philip Morris Cos. resumed its slide.

The decline came after two reports showed inflation may not be under control, an expectation that helped stocks recover from last month's woes.

The Dow Jones industrial average slumped 57.70 to 5,647.28, its worst decline since July 15. Only three companies in the 30-stock average rose -- Coca-Cola Co., AlliedSignal Inc. and General Electric Co.

Philip Morris dropped $3.50 to $90.125, extending a slide that began Friday when a Florida court decision threatened to expose the maker of Marlboro cigarettes to millions of dollars in product liability awards.

Other tobacco stocks were also weak. RJR Nabisco Holdings Corp., maker of Camels, fell $1.25 to $26.625; Loews Corp., maker of Newports, slid $1.75 to $75.75; and UST Inc., maker of Skoal and Copenhagen snuff, tumbled $1 to $31.625.

The Standard & Poor's 500 index dropped 5.57 to 660.2; the Nasdaq composite index declined 12.12 to 1,126.15; the Russell 2,000 index of small-company shares fell 1.74 to 325.63; the Wilshire 5,000 index dropped 40.68; the American Stock Exchange market value index dropped 2.73 to 549.79; and the S&P midcap 400 index declined 1.73 to 227.48.

Declining stocks outnumbered advancing issues by almost 2 to 1 on the New York Stock Exchange, where volume totaled 362 million shares.

In response to stronger-than-expected inflation and retail sales reports, yields on benchmark 30-year Treasury bonds jumped to 6.78 percent yesterday from 6.69 percent.

Consumer prices in July rose at a faster-than-expected 0.3 percent last month, the government said, led by higher food and housing costs. Economists had forecast a 0.2 percent increase.

Also yesterday, the Commerce Department said retail sales last month rose by a higher-than-expected 0.1 percent, compared with forecasts of a 0.2 percent decline.

Investors also focused on a batch of mixed earnings from major retailers for the three months ended July 31.

Profits at Texas-based J. C. Penney Co., down 87.5 cents to $52.25, fell to 37 cents a share from 46 cents a share a year ago, 4 cents below analysts' estimates.

TJX Cos. dropped $1.625 to $32.875 after saying it earned 40 cents a share in the second quarter compared with a loss of 37 cents last year and estimates of 35 cents.

Dillard Department Stores Inc., down 50 cents to $33.75, saw earnings grow to 35 cents a share from 34 cents in the year-earlier period, 4 cents shy of forecasts.

Coca-Cola rose to a record $50.25, up 50 cents. This year, the soft-drink maker has become the second most valuable stock in the United States, surpassing AT&T Corp. and Exxon Corp. and trailing only General Electric Co. Coke shares, ahead 53 percent so far this year, yesterday were 40 times higher than they were in 1982.

Among computer-related shares, Maxim Integrated slumped $2.50 to $29.875. The semiconductor maker reported lower-than-expected fourth-quarter earnings of 49 cents a share, up from 17 cents last year but below forecasts of 50 cents a share.

Intel Corp. fell $1.875 to $80.25; Lattice Semiconductor Corp. fell $2.125 to $26; Analog Devices dropped 75 cents to $22.125; and Micron Technology Inc. fell $1 to $23.50.

Deere & Co. jumped $2.50 to $39 after it said third-quarter earnings rose 13 percent.

Casino stocks tumbled after Morgan Stanley & Co. warned that the industry is building too many parlors for too few gamblers. Circus Enterprises Inc. fell $1.75 to $30.125; Mirage Resorts Inc. dropped $1 to $22; Hilton Hotels Corp. skidded $4.625 to $106.375; and Harrah's Entertainment Inc. sank 87.5 cents to $21.25.

Pub Date: 8/14/96

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