Stocks fall on concern that rates might rise Banks lead decline on expectations of action by Fed

March 19, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell yesterday on the expectation that the Federal Reserve will raise interest rates as soon as next week, putting a damper on this year's advance. First Chicago NBD Corp. and other bank stocks led the decline.

"Some people may see this as the start of a big move in rates," said Douglas Eby, a money manager at Robert E. Torray & Co., which oversees assets of $2.7 billion. "The perception is, near term, a Fed move is not good for stocks."

The Dow Jones industrial average took its second 100-point plunge in a week, before recovering to 6,896.56, down 58.92. Leading the decline, J. P. Morgan & Co. fell $3.375 to $105 and DuPont Co. lost $2.875 to $111. The 30-stock average closed at a record 7,085.16 a week ago and is still up almost 7 percent this year.

First Chicago NBD fell $2.625 to $55.75 after it said its credit card unit will contribute less to profit this year than last year because of bad loans. Advanta Corp., which made similar comments, dropped $1.125 to $30.75.

The Standard & Poor's 500 index dropped 6.05 to 789.66, dragged down by NationsBank Corp., Wells Fargo Co. and other bank shares. The Nasdaq composite index slid 10.09 to 1,269.34, led by Microsoft Corp., Oracle Corp. and Dell Computer Corp.

Among broad U.S. stock indexes, the Russell 2,000 index of small capitalization stocks fell 2.44 to 354.93; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, tumbled 58.78 to 7,517.89; the American Stock Exchange composite index dropped 0.79 to 595.45; and the S&P 400 midcap index fell 1.68 to 260.82.

About 1,673 stocks fell and 863 rose on the New York Stock Exchange, the third time in four days that decliners swamped advancers by more than 500 shares. Roughly 467 million shares traded, compared with the three-month daily average of 491 million shares.

Micron Technology Inc. was the day's most active issue, falling $4.25 to $39.875 in trading of 14.9 million shares. The semiconductor company reported fiscal second-quarter profit from operations of 18 cents a share, which topped estimates of 13 cents a share. Still, the stock had risen about 50 percent since mid-January in anticipation of those results.

After Micron Technology, yesterday's most active stocks in U.S. trading were Novell, Intel Corp., Cisco Systems Inc. and Microsoft.

The yield on the benchmark 30-year Treasury bond finished up 0.01 at 6.96 percent, after rising to 7.00 percent earlier when the government reported housing starts unexpectedly surged in February. The yield is up from 6.52 percent Feb. 14 and is hovering at its highest since late September.

The prospect of even higher rates, coupled with concern about rising credit card defaults, hurt shares of banks, which make more money on their loans when rates are low and borrowing demand is brisk. The Keefe, Bruyette & Woods bank index dropped 12.82 to 595.91, bringing its loss for the past six days to 7 percent.

Chase Manhattan Corp. slid $3.125 to $99.625; Citicorp dropped $1.75 to $116.25; BankAmerica Corp. fell $3.875 to $111.375; Wells Fargo & Co. slipped $5.75 to $297.125; and KeyCorp fell $1.75 to $51.25.

One harbinger of rising interest rates, the Dow Jones utilities average, fell 3.15, or 1.4 percent, to 221.56. It was the biggest one-day slide since Dec. 12, and the lowest level since Oct. 16.

Consolidated Natural Gas Co. fell $1.50 to $52; DTE Energy Co. fell $1 to $27.50; Houston Industries Inc. dropped 50 cents to $21.125; and Peco Energy Co. slipped 37.5 cents to $20.50.

Novell Inc. bucked the broad market's decline, gaining 87.5 cents to $9.4375 after naming Eric Schmidt chairman and chief executive. Schmidt was chief technology officer at Sun Microsystems Inc., which lost 75 cents to $28.125.

Shares of Raytheon Co. slumped $1.75 to $46.875. The aerospace and defense products maker said the Justice Department asked for more information about its $2.95 billion acquisition of Texas Instruments Inc.'s defense electronics business.

Boeing Co. dropped $2.75 to $103.75 after Northwest Airlines signed a tentative agreement to order 40 long-range A330-200 jetliners from Airbus Industrie valued at $4.4 billion.

Dell dropped $3.125 to $64.75 and Gateway 2000 Inc. slid $2.50 to $50.125 on a report that No. 1 PC maker Compaq Computer Corp. is moving more aggressively to encroach on their business of selling directly to customers.

Pub Date: 3/19/97

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