Stocks Continue Decline Spurred by Greenspan
Stocks ended lower for a third straight day Friday as the market remained under a cloud following Federal Reserve Board Chairman Alan Greenspan’s comments about high stock prices and hints about an interest rate hike.
The Dow Jones industrial average closed down 47.33 points at 6,877.74. For the week, the index lost 53.88 points.
Broader measures also fell, but the Nasdaq composite index, hard-hit by two weeks of profit taking in the technology sector, was cushioned by some strength in the depressed shares of computer industry bellwethers.
Stocks have been retreating since Wednesday, when Greenspan issued a stern warning that the market’s stunning advance poses an inflationary risk. Greenspan, in a report to Congress, cautioned that the central bank may increase interest rates even before a measurable increase in inflation becomes evident.
But by and large, analysts said the market remained under a pall that was unlikely to lift before Greenspan’s second round of testimony next Wednesday to the House of Representatives.
“We’ll have to see what happens after everybody absorbs his next comments,” said Edgar Peters, chief investment strategist at PanAgora Asset Management Inc. “I think we’ll have a lot of sideways volatility for the time being.”
Bond prices steadied after a two-day pullback, leaving the yield on the 30-year Treasury--a barometer for long-term borrowing costs--unchanged at 6.80%. Friday’s economic readings offered a mixed bag of clues on inflation.
In another indication that the nation’s economic activity may be too brisk to keep inflationary pressures in check, the National Assn. of Realtors reported that sales of existing single-family homes unexpectedly rose 2.1% in January.
But a survey of Midwestern factory executives suggested that manufacturing activity hadn’t accelerated as much as expected in that key region during February. And in a separate report, the Commerce Department said the U.S. economy grew at a 3.9% annual rate in the final three months of 1996, slower than government economists first estimated.
Fed officials and economists are likely to pay close attention to Monday’s report on a national survey of factory executives, the first broad reading on February’s business activity. The report from the National Assn. of Purchasing Managers could offer clues on whether there’s been more upward pressure on production costs, a key force behind inflation.
Declining issues outnumbered advancers by a 4-to-3 margin on the New York Stock Exchange in heavy trading.
The Standard & Poor’s 500-stock list fell 4.25 points to 790.82, the NYSE composite index fell 2.38 points to 415.51; and the American Stock Exchange composite index fell 0.93 point to 594.24.
The Nasdaq composite index fell 3.66 points to 1,309.00 despite a strong day for a number of leading technology issues.
Among Friday’s highlights:
* The Dow was dragged down by drug giant Merck, which lost 1 3/4 to 92 1/8. Other decliners among pharmaceutical stocks included Pfizer, down 3/4 to 91 5/8, and American Home Products, down 5/8 to 64.
* Networking stocks met with another session of stiff selling. Ascend Communications fell 4 3/4 to 52 1/4, and Bay Networks shed 1/4 to 19 1/8.
Industry leader Cisco Systems closed up 9/16 to 55 5/8, Microsoft rose 1 3/8 to 97 1/2 and Intel rose 2 9/64 to 141 7/8 as three of the few blue-chip tech stocks to show signs of recovery.
Intuit fell 2 3/4 to 22 5/8 after the financial software company said it expects slowing sales for at least the next two quarters.
* Financial issues lost ground for a third day since rising rates cut into profits. NationsBank lost 1 1/4 to 60, First Bank System lost 2 5/8 to 78 1/2 and Mellon Bank lost 1 5/8 to 80 3/8. J.P. Morgan fell 2 1/8 to 105, and Citicorp fell 2 5/8 to 116 3/4.
Collective Bancorp fell 7/8 to 41 1/8 after Summit Bancorp said it will buy the company for $867 million in stock, allowing Summit to expand in southern New Jersey. Summit gained 5/16 to 47 13/16.
Fleet Financial Group bucked the trend, however, rising 1 1/2 to 61 on speculation about a possible merger with NationsBank.
* General Cigar Holdings jumped 5 to 23 in the cigar maker’s debut on the NYSE following its 6-million-share initial public offering.
Overseas, Tokyo’s Nikkei stock average fell 2.4%, Frankfurt’s DAX index fell 0.5% and London’s FTSE-100 fell 0.7%.
Market Roundup, DX
