FINANCIAL MARKETS : Cable and Entertainment Issues Lead Stock Advance

Market Overview

Cable and entertainment stocks soared Wednesday after announcement of one of the largest mergers ever, the combination of Bell Atlantic Corp. and Tele-Communications Inc.

* The Treasury market ended narrowly mixed, with long-term interest rates dipping slightly.

Stocks

The $21-billion Bell Atlantic and TCI merger captured the imagination of market participants. Many cable and entertainment businesses saw their stocks jump dramatically.

The broader market, however, did not experience the feverish trading. The Dow Jones industrial average gained a modest 10.06 points to close at 3,603.19. In an even broader measure of market activity, declining issues outnumbered advances about 10 to 9 on the New York Stock Exchange. Big Board volume came to 290.95 million shares.

The Nasdaq stock market, a traditional haven for technology issues, saw extremely heavy volume of 415.36 million shares, far exceeding the year’s previous record of 343.2 million set May 20.

“Anything related to the information highway did extremely well today,” said Mary Farrell, first vice president at PaineWebber Group.

* Disney gained 4 5/8 at 44 1/2 and Time Warner gained 1 7/8 at 44 7/8, both in active dealings. On the American Stock Exchange, Cablevision Systems gained 9 1/4 at 63 5/8.

The deal puts a new spin on the brewing takeover battle for Paramount Communications Inc. TCI is the main mover behind a $9.5-billion bid by QVC Network Inc. for Paramount. Viacom Inc. first entered a bid for Paramount, a diversified media and communications company.

The scramble to ride the cable television rally reached almost comic proportions when Transcontinental Realty Investors surged 1 1/2 to 17 on heavy volume after some investors confused it with Tele-Communications, which is traded on the Nasdaq.

The cable company’s acronym TCI is Transcontinental’s ticker symbol on the New York Stock Exchange.

* Trading in Transcontinental was halted but later reopened and closed off 1/4 at 15 1/4.

* Bell Atlantic was up 5 7/8 at 65 7/8 in heavy trading on the NYSE, while Tele-Communications Class A shares, the most active issue on the Nasdaq, were up 3 at 31 3/8.

* Paramount was up 5/8 at 77 3/8, QVC was up 2 1/2 at 57 1/2 and Viacom soared, with its Class B shares up 4 3/4 at 57 and Class A shares up 5 5/8 at 62 1/2. Another partner in the QVC bid for Paramount, Comcast Corp., was up 6 3/8 at 39 5/8 on Nasdaq.

The rally remained selective, however, and did not spill over into the broader market.

“This is not an indication that we’re going back to 1986 and 1988 and there will be bids for every stock under the sun,” said Steven R. Resnick, investment strategist for Cowen & Co.

Farrell said investors remained focused on the rising tide of third-quarter earnings reports, which she said are coming in near their expected target levels. CBS Inc., up 8 3/4 at 285 1/8, reported earnings of $7.39 a share for the third quarter, including a onetime gain of $3.20, up from $2.76 a share during the third quarter of 1992.

* Philip Morris was the most active issue on the NYSE, up 2 3/4 at 51 1/2. A brokerage firm placed a “buy” recommendation on the company.

* Host Marriott was up 1/8 at 6 1/2 in heavy trading. The dividend on the company’s stock will be changed as of Thursday, a fact that usually accounts for volatile trading.

* A report by the Semiconductor Industry Assn. about a decline in September computer chip orders hit chip manufacturers. Texas Instruments lost 4 1/4 at 62 1/4 while Intel, trading on Nasdaq, lost 1 1/2 at 63 1/2.

* Woolworth gained 1/4 at 26 1/8 after it announced plans to close or redesign nearly 1,000 stores in North America and eliminate 13,000 jobs over the next several months to improve profit.

Health maintenance organization stocks tumbled on news that the California Public Employees Retirement System said it expects managed health care companies to roll back premium rates to its members by 5% in 1994.

* Takecare fell 2 1/4 to 40 1/2, Pacificare Health Systems tumbled 2 1/2 to 31 1/4 and Foundation Health lost 1 1/4 to 23 1/8.

In overseas markets, London’s Financial Times 100-share average closed down 13.8 points at 3,080.9. In Frankfurt, the DAX average was 2.90 points higher at 2,001.51, while Tokyo’s 225-share Nikkei average closed down 98.91 points at 20,038.40.

Credit

Bond prices fluctuated in a narrow range of buying and selling as traders shrugged off several developments, including congressional testimony by Federal Reserve Board Chairman Alan Greenspan.

Most investors refrained from major purchases or sales of bonds ahead of the release of wholesale inflation figures today.

The key 30-year bond yield fell to 5.91% from 5.92% on Tuesday, while its price, which moves in the opposite direction, gained 3/32 point, or 94 cents per $1,000 in face value.

Prices of short-term Treasury securities, meanwhile, fell 1/32 point, and intermediate maturities dropped by as much as 3/32 point, the Telerate Inc. financial information service reported.

The Fed chairman strongly rejected a congressional move to make the nation’s central bank more politically accountable, but made no comments to suggest any change in monetary policy direction.

Dan Seto, an economist at Nikko Securities International Co., said the market had little reaction because President Clinton has said he does not support changes in the Fed.

The bond market also largely brushed off an auto industry report that cars sold at a higher than expected annual rate of 6.8 million units over the last 30 days. Economists generally expected a rate of 6.5 million.

But the report did add to speculation that the government report on September retail sales, also due out today, will exceed growth expectations. Forecasts call for a 0.3% increase.

Investors in fixed-income securities typically sell bonds in reaction to news of economic growth, which can aggravate inflation. Higher inflation tends to hurt the value of investments that pay a fixed rate of return.

The federal funds rate, the interest on overnight loans between banks, was quoted at 2.5%, down from 3% on Tuesday.

Other News

Precious metals fell as traders took profits on New York’s Comex. Gold for current delivery closed at $366.20 an ounce, down $1.60 from Tuesday, while silver closed at $4.413 an ounce, off 0.8 cents from Tuesday.

Light, sweet crude for November delivery fell 7 cents to $18.64 a barrel.

Elsewhere, the dollar finished mixed in light trading as the currenvcy markets focused on weakness in the French and Belgian currencies.

Currency traders said the dollar moved little as investors waited to see today’s inflation and retail sales figures.

Market Roundup, D6