Dow Off 11.56 on Fears of Oil Price, Interest Hikes

The stock market fell Monday on fears that higher oil prices, due to Iran’s decision to accept a cease-fire with Iraq, would raise prices throughout the economy.

Investors also were worried about higher interest rates after the government said U.S. factories and mines were operating at higher capacity in June, news that could prompt the Federal Reserve to tighten credit.

The Dow Jones average of 30 industrials, which had risen 23.30 points last week, dropped 11.56 to 2,117.89.

Declining issues outnumbered advances by nearly 9 to 5 in nationwide trading of New York Stock Exchange-listed stocks.

Volume on the floor of the Big Board came to 156.21 million shares, down from 199.71 million in the previous session.

Rate Hikes Feared

Traders said there appeared to be some interest in oil stocks, after crude prices jumped more than $1, but investors were generally worried that higher oil prices, on top of rising food prices, would rekindle inflation. Crude oil for delivery in August closed up 84 cents at $15.70 a barrel.

Investors also were worried about generally rising interest rates. Britain’s central bank lifted its rates for the sixth time since early June to cool inflation, and the equities market in Frankfurt was weighed down by fears that the Bundesbank would raise rates.

A report that U.S. factories, mines and utilities operated at 83.1% of capacity in June, up from 82.9% in May, suggested that the U.S. economy is expanding further, analysts said.

Airlines Mostly Lower

“The recent economic numbers have been on the strong side,” said Jerome Hinkle, of Sanford C. Bernstein & Co. “With the capacity utilization rate up, it looks like the economy is moving along.”

Fed Chairman Alan Greenspan last week confirmed that the central bank had tightened credit in the spring, and he said the Fed would err on the side of restrictiveness to keep inflation under control.

Up to now, rising food prices, due to the severe drought in the Midwest, have driven inflation above last year’s levels. Economists are worried that a sustained rise in oil prices, which have been weak for most of the year, could drive inflation substantially higher.

“We are seeing some of the money flow going into the IBMs and the Fords and the GEs (General Electric), but investors are very cautious. Everyone is waiting for the Fed to tighten,” said James Andrews, head of institutional trading at Janney Montgomery Scott Inc.

MCI Communications, the most active issue in the over-the-counter market, rose 1 to 17 3/8. The company reported that its second-quarter earnings increased to 25 cents a share from 3 cents in the comparable period last year.

Apple Computer, another prominent OTC stock, gained 1/2 to 45 1/2 on higher quarterly profits.

Among Big Board-listed issues, Union Carbide was up 7/8 at 25, and United Technologies was up 5/8 at 38 1/8. Both were helped by higher earnings.

Energy stocks generally showed fractional gains on the oil-price news, while airlines were mostly lower.

Prices Fall Elsewhere

Losers among the blue chips included McDonald’s, down 1 3/8 at 45 1/8; Alcoa, down 3/8 at 54; General Electric, down 3/4 at 43, and International Business Machines, down 3/8 at 125 1/8.

Macmillan Inc. rose 7/8 to 79. As the Robert M. Bass Group began a $75-a-share tender offer for the company, speculation on Wall Street about possible further bids drove the stock higher.

The NYSE’s composite index of all its listed common stocks dropped 0.82 to 152.83.

Standard & Poor’s industrial index fell 1.68 to 312.70, and S&P;’s 500-stock composite index was down 1.54 at 270.51.

The NASDAQ composite index for the over-the-counter market edged up 0.18 to 394.77. At the American Stock Exchange, the market-value index closed at 309.08, down 0.23.

On the Tokyo Stock Exchange, the 225-issue Nikkei index, which lost 170.29 points Friday, fell another 251.67 points, or 0.91%, to close the day’s trading at 27,662.12 points.

Prices finished lower on the London Stock Exchange, but analysts blamed it on technical factors in the market rather than on increases in some key lending rates.

The Financial Times 100-share index fell 12.2 points to 1,849.3.