Stocks fall a 3rd day amid fears over rates Some computer stocks recover, but Dow again fails to top 7,000

March 01, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks sank yesterday for a third day, led by Merck & Co. and bank shares, amid concern rising interest rates will cut into corporate profits.

"The market is taking seriously the possibility that higher rates will hurt prices," said Philip Orlando, chief investment officer at Value Line Asset Management, with $6 billion in assets.

The Dow Jones industrial average fell 47.33 to 6,877.74, led by Merck, down $1.875 to $92. The 30-stock average was little changed for February, rising 68 points or 0.93 percent, compared with a 5.7-percent gain in January. The Dow fell 2.3 percent in the past three days.

The Standard & Poor's 500 index fell 4.25 to 790.82 and the Nasdaq composite index, filled with computer-related stocks, fell to 1,309. Intel closed up $2.140625 to $141.875 after falling to $137.

On the broader market, the Russell 2,000 index of small capitalization stocks fell 1.10 to 360.05; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, dropped 43.17 to 7,559.42; the American Stock Exchange composite index shed 0.93 to 594.24; and the S&P midcap index lost 0.76 to 262.36.

The benchmark 30-year bond's yield was unchanged at 6.80 percent.

Orlando was one of 10 money managers, who control more than $130 billion, to say that the three-day, 2.6-percent drop in the S&P 500 stems from comments by Alan Greenspan. The Federal Reserve chairman had said the central bank may have to raise rates to forestall inflation. Higher rates are viewed as bad for stocks because they raise the cost of corporate borrowing.

Computer shares rallied as investors looked to capitalize on the a 8.64-percent slide in computer shares this month, which had made them cheap relative to 1997 earnings prospects.

Intel Corp., Microsoft Corp. and International Business Machines Corp. gained, one day after computer stocks suffered their worst one-day decline since mid-July.

The Morgan Stanley High Tech Index rose 0.04 to 373.33, after falling 16.48 Thursday. Microsoft rose $1.375 to $97.50 and Cisco Systems Inc. rose 56.25 cents to $55.625.

Some 508 million shares changed hands on the New York Stock Exchange, as seven shares fell for every five that rose.

In another sign of wariness, the rate of new investment in U.S. stock mutual funds slowed from last week.

A net $4.10 billion was invested in stock funds in the week ended Wednesday, down from $4.88 billion the week before, according to AMG Data Services, a research group in Arcata, Calif., that tracks mutual fund money flows. The net investment excluded reinvested dividends, AMG said.

Financial shares lost ground for a third day. NationsBank lost $1.25 to $60; First Bank System Inc. lost $2.625 to $78.50; and Mellon Bank Corp. lost $1.625 to $80.375.

Collective Bancorp shares fell 87.5 cents after Summit Bancorp said it will buy the company for $867 million in stock, or $42.51 a share, allowing Summit to expand in southern New Jersey.

In a sign investors could be wary of the market, the pace of new buying of U.S. stock mutual funds slowed from last week. A net $4.10 billion, which excluded reinvested dividends, was invested stock funds in the week ended Wednesday, down from $4.88 billion the week before, according to AMG Data Services, a research group in Arcata, California, that tracks mutual fund money flows.

Biofield Corp. fell $5.75 to $4.75 after the U.S. Food and Drug Administration rejected its application for a new device to diagnose breast cancer.

Intuit Inc. fell $2.75 to $22.625 after the company said earnings rose 28 percent in its second quarter, in line with analyst estimates.

Pub Date: 3/01/97

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