Stocks fall slightly lower amid fears over rate rise

Higher new-home sales add to anxiety economy is growing too fast

April 27, 2004|By BLOOMBERG NEWS

NEW YORK - U.S. stocks fell yesterday after a report on new-home sales added to speculation that the Federal Reserve may increase interest rates because of an improving economy. Computer-related stocks led the decline.

The Dow Jones industrial average lost 28.11, or 0.3 percent, to 10,444.73, after three consecutive daily gains. The Standard & Poor's 500 index shed 5.07, or 0.5 percent, to 1135.53, its first drop in four days. The Nasdaq composite index fell 13, or 0.6 percent, to 2036.77.

In other broad market indexes, the Russell 2000, a benchmark of small-cap stocks, dipped 1.26 to 589.45, and the Wilshire 5000 total market index dropped 40.72 to 11,109.70.

The Sun-Bloomberg index of the top stocks in Maryland slipped 0.34 to 274.45.

The market was indecisive for much of the day, with the major indexes fluctuating in and out of positive territory. But stocks turned lower toward the close as investors had little incentive to buy.

Investors have been preoccupied with interest rates for the past two weeks after strong economic data and comments by Federal Reserve Chairman Alan Greenspan made it clear that the cost of borrowing will likely rise sooner rather than later.

The reality of an impending rate increase has generally overshadowed positive economic news and the very strong earnings reports many companies have issued.

"We're having a great year on the earnings front," said Richard Jandrain, chief investment officer at Banc One Investment Advisors, which oversees $187 billion in Columbus, Ohio. "The fear, though, is that the economy is too strong, the Fed is going to have to pull the punch bowl away and that we'll see a big move up in interest rates."

"I'm not surprised to see the market consolidating," said Peter Goldman, who helps manage $1 billion for Chicago Asset Management. "Investors right now are waiting to see when the Fed is going to bump rates up."

Nine stocks fell for every five that rose on the New York Stock Exchange. Some 1.3 billion shares changed hands on the Big Board, 12 percent below the average for the past three months.

Microsoft, whose shares climbed 6.1 percent Friday, shed 30 cents to $27.24. Intel Corp., the world's biggest semiconductor maker, lost 38 cents to $27.15. An index of the computer-related shares in the S&P 500 lost 1.2 percent, the biggest drop among the 10 industry groups in the benchmark.

Humana Inc., the biggest manager of health plans for the U.S. military, lost $1.30 to $17.71. The 6.8 percent decline was the steepest in the S&P 500. First-quarter medical expenses, which are slowing for most of Humana's competitors, rose to 84.4 cents of every premium dollar from 83.4 cents a year earlier.

ChevronTexaco Corp. increased 56 cents to $92.25.

Boeing Co., the world's second-biggest maker of commercial aircraft, climbed 79 cents to $43.24. The 1.9 percent gain was the largest in the Dow. All Nippon Airways Co. placed a $6 billion order for 7E7 planes, allowing Boeing to commit to build its first new model in more than a decade.

Genentech Inc., the second-largest biotechnology company, increased $13.77 to $131.99, a record, and OSI Pharmaceuticals Inc. more than doubled, surging $52.96 to $91.10. Genentech and partners OSI and Roche Holding AG said their experimental cancer treatment Tarceva prolonged the lives of lung-cancer patients who no longer responded to other treatments in clinical trials.

Abgenix Inc. added $3 to $17.70, while Amgen Inc. climbed 75 cents to $59.06. Both are testing a colon cancer drug that uses similar technology as Tarceva.

TXU Corp., the largest electricity supplier in Texas, added $3.90 to $33.53. The 13 percent gain was the biggest in the S&P 500. TXU agreed to sell its Australian power unit to Singapore Power Ltd. for $3.72 billion. The sale is expected to cut TXU's consolidated debt by $1.7 billion and yield proceeds of about $1.8 billion. The stock has risen 41 percent this year.

U.S. investors' optimism for stocks fell in April to a six-month low even as profits climbed, a survey by UBS AG and Gallup Organization said. First-quarter earnings for companies in the S&P 500 rose 23.5 percent, according to Thomson Financial.

Overseas, Japan's Nikkei stock average rose 0.4 percent; Britain's FTSE 100 was up 0.04 percent; Germany's DAX index was up 0.5 percent; and France's CAC-40 was down 0.7 percent.

LOCALLY

Lockheed Martin

Shares in Lockheed Martin Corp. of Bethesda, the largest U.S. defense contractor, gained 29 cents, to $46.50, after reports from a local union that as many as 500 jobs would be cut at the Lockheed plant in Fort Worth, Texas.

The job cuts will come as Lockheed Martin slows production of the Air Force's F-16 fighter as the military upgrades to F/A- 22 fighter-attack planes.

NATIONALLY

Wal-Mart Stores

Shares of Wal-Mart fell 83 cents to $58.14.

April sales at U.S. stores are rising near the low end of its forecast for a gain of as little as 4 percent as increasing gasoline prices may be leading shoppers to trim spending.

The world's largest retailer's sales in March increased 6 percent at stores open at least a year. Wal-Mart shares have gained 9.6 percent this year.

The Associated Press contributed to this article.

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