Stocks fall after Fed nudges up rates Dow declines 29 points

cyclicals suffer on worry over expansion, profits

March 26, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell yesterday after the Federal Reserve raised interest rates, sparking concern that economic expansion and corporate profits will suffer this year.

Aluminum Co. of America, International Paper Co. and Union Pacific Corp. paced the decline, which came after the central bank raised the overnight bank lending rate to 5.50 percent from 5.25 percent. Though the move was expected, investors worried that spending by consumers and businesses will begin to slow.

The Dow Jones industrial average fell 29.08 to 6,876.17 in a seesaw session. The Dow jumped 47 points just after the Fed's decision was released, tumbled 80 points within half an hour, then recovered slightly before the final bell.

The Standard & Poor's 500 index fell 1.82 to 789.07, its fourth drop in six days. The Nasdaq composite index rose 5.42 to 1,248.06 as computer-related shares rebounded, with Intel Corp. climbing $2.625 to $133.25; Cisco Systems Inc. up 75 cents to $47.875; and Dell Computer Corp. up $2.50 to $67.50.

Broad market indexes were mixed. The Russell 2,000 index of small capitalization stocks rose 1.22 to 350.70; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, dropped 4.12 to 7,497.33; the American Stock Exchange composite index lost 1.78 to 586.16; and the S&P 400 mid-cap index rose 1.02 to 260.35.

Shares of companies whose profits boom when economic activity is brisk -- so-called "cyclical" stocks -- were among the day's biggest decliners.

The Morgan Stanley cyclical index slid 4.91 to 414.27 as Alcoa dropped $2 to $70; International Paper slipped 87.5 cents to $42; Union Pacific slid $1.125 to $59.75; Goodyear Tire & Rubber Co. fell 87.5 cents to $54.375; and metals producer Phelps Dodge Corp. dropped $1.75 to $74.25.

Among the day's biggest losers was Integrated Systems Inc., which tumbled $5.75 to $11.375. The company, which makes products used to develop "embedded" computer systems such as those in anti-lock brakes, said it expects to report lower-than-expected fourth-quarter earnings this week.

Global DirectMail Corp. tumbled $7.50 to $20.50. The computer products direct marketer said it does not expect first-quarter earnings to grow from a year ago.

Network Peripherals Inc. dropped $2.125 to $8.625 after it said it expects a first-quarter loss and that sales of some computer networking products will be lower than analysts expected.

American Electric Power Co. climbed 62.5 cents to $42.125; Consolidated Edison Co. of New York rose 50 cents to $30.75; and PanEnergy Corp. increased 50 cents to $43.50.

Banks were mixed as Banc One Corp. fell $1 to $43.75; First Union Corp. slid $2.50 to $88.75; Barnett Banks Inc. climbed 75 cents to $50.875; and Bank of Boston Corp. rose 50 cents to $73.125.

Drug shares gained after Paul Brooke of Morgan Stanley & Co. boosted his investment recommendation on Warner-Lambert Co. to "strong buy" from "outperform." Warner-Lambert rose $1.75 to $91.25; Merck & Co. climbed $1.125 to $91; Eli Lilly & Co. rallied $2.50 to $89.25; and Rhone-Poulenc Rorer Inc. rose $1.25 to $75.50.

Pub Date: 3/26/97

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