Dow drops 45 points on rate worries Strong economic gains renew fear of Fed action to prevent overheating

March 13, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell yesterday, following bonds, as a Federal Reserve report failed to quell concern that interest rates may be headed higher this year.

"Everybody's concerned about interest rates," said Timothy Stives, head of equities at Core-States Investment Advisers. Investors may be led to take profits on stocks, he said.

The central bank's "beige book" report showing that the U.S. economy moved ahead in the opening months of 1997 hurt shares of drug companies such as Merck & Co., which do best when overall earnings prospects are weaker. The same report helped Whirlpool Corp., International Paper Co. and other so-called "cyclical" stocks, among the past year's laggards.

The Dow Jones industrial average fell 45.79 to 7,039.37, after setting a record 7,085.16 Tuesday. Merck fell $1.625 to $92.25; Procter & Gamble Co. slid $1.50 to $125; and Coca-Cola Co. fell $1 to $61. At the close, each stock had risen about 18 percent so far in 1997, double the Dow's gain in 1997.

The Standard & Poor's 500 index slid 7.08 to 804.26. The Nasdaq composite index fell 12.63 to 1,304.13. Hurting both indexes, Intel Corp. slid $1.125 to $142.75 and Cisco Systems Inc. dropped $1.875 to $50.875.

Among broad U.S. stock indexes, the Russell 2,000 index of small capitalization stocks fell 3.47 to 364.40; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, tumbled 65.86 to 7,675.29; the American Stock Exchange dropped 1.39 to 602.04; and the S&P 400 midcap index dropped 1.80 to 266.02.

Yesterday's most active stocks in U.S. trading were Cisco Systems, Intel, Wal-Mart, Staples Inc. and Advanced Micro Device Inc.

Cisco, Sun Microsystems Inc. and Digital Equipment Corp. all fell amid concern that corporate demand for large computer systems and networking equipment is slowing. Cisco fell $1.875 to $50.875; Sun fell $2 to $29.75; and DEC lost $2.125 to $29.875.

Advanced Micro Devices rallied $4.25 to $45.875. Prudential Securities Inc. analyst Mark Edelstone forecast improved sales of the semiconductor company's memory and logic chips, and sales of its microprocessors.

The benchmark 30-year Treasury bond is yielding 6.88 percent, up from 6.52 percent on Feb. 14 and 6.81 Tuesday.

Philip Morris Cos., one of the 30 stocks in the Dow average, fell $1.625 to $138 after the tobacco and food company said in an annual filing with the U.S. Securities and Exchange Commission that it might join talks to settle health-related lawsuits.

Oracle Corp. slid $1.625 to $34.125 ahead of the database software company's scheduled release of fiscal third-quarter earnings. Analysts expect the Redwood Shores, California-based company to earn 29 cents a share, up from 22 cents a year ago.

Among cyclical stocks that gained, Whirlpool climbed $1.125 to $50.75; Sears jumped $1.125 to $56.625; International Paper rose 62.5 cents to $43.125; and Ford Motor Co. rose 37.5 cents to $32.625.

Among utilities, Houston Industries Inc. slid 62.5 cents to $21.625; People's Energy Corp. fell 62.5 cents to $35; and Public Service Enterprise Group Inc. fell 37.5 cents to $26.50.

One of the day's biggest decliners was Access Health Inc., which tumbled $7.125 to $15.375. The health-care information service provider said it expects fiscal 1997 earnings and revenue to be below analysts estimates.

Noven Pharmaceuticals Inc. dropped $2.4375 to $8.5625 after the company said it expects to record a fourth-quarter loss of about 10 cents a share. Analysts expected the company to earn 11 cents a share.

Marsh & McLennan Cos. surged $7 to $129 after the company said it will buy Johnson & Higgins for $1.8 billion in stock and cash, forming the largest insurance brokerage company.

Shares of General Mills Inc. slumped $1.75 to $63 after it said it earned 78 cents a share in the fiscal third quarter, a penny short of analyst forecasts.

Pub Date: 3/13/97

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