Blue Chips Rise as Other Stocks Head Lower

The Dow Jones industrial average edged to its second straight record high, but most stock measures drifted lower Tuesday as interest rates rose.

The Dow crossed the 7,100 mark for the first time, but surrendered a nearly 33-point gain to close at 7,085.16, up just 5.77 on the day.

Broader stock indicators turned negative as money market interest rates turned higher, providing an excuse for some profit taking on Monday’s record-setting advance. Among the worst hit were banks, whose profits are squeezed when interest rates are rising.

Advancing issues outnumbered decliners by a 10-to-9 margin on the New York Stock Exchange.

Aside from the movement in interest rates, however, there were no broad developments to steer a rather uneventful session.

“The market is very divided on the outlook for interest rate policy,” said Charles White, managing director at Avatar Associates. “Right now there’s no compelling evidence to drive us in either direction.”

Investors were worried about Federal Reserve Board Chairman Alan Greenspan’s warnings recently that stocks could be overvalued and that the central bank might raise short-term interest rates.

As bond prices fell, the yield on the benchmark 30-year Treasury rose as high as 6.86% from late Monday’s 6.81% before settling at about 6.85%.

Analysts said the market was likely to become even more cautious ahead of the meeting of the Fed’s policy-setting Federal Open Market Committee on March 25.

There was little reaction to news that workplace productivity increased 0.7% last year, a downward revision from the 0.8% annual gain reported a month ago, but still the biggest improvement in four years. The Labor Department also reported that fourth-quarter productivity grew at a 1.1% annual rate, only half the 2.2% figure originally reported.

Though disappointing, the productivity revisions weren’t enough to change the unit labor cost gain for all of 1996: 2.9%, the same as 1995.

Among key stock indexes, the Standard & Poor’s 500-stock list fell 2.31 points to 811.34, while the NYSE composite index, which closed at a record high on Monday, fell 0.64 point to 427.06.

The Nasdaq composite index fell 5.96 points to 1,316.76.

Among Tuesday’s highlights:

* The Dow’s biggest gainers were Boeing, up 2 to 108 1/8; and Procter & Gamble, up 1 3/4 to 126 1/2. The weakest Dow component was Texaco, which fell 2 1/8 to 102 7/8.

* Several technology issues initially extended Monday’s rally, but most pulled lower by the close. IBM led the Dow’s advancers for much of the session, gaining as much 3 5/8, but finished down 1/8 at 146. Intel fell 7/8 to 143 7/8, and Microsoft fell 1 5/8 to 98 3/8 on Nasdaq.

Other tech issues suffered. Cisco Systems fell 5/8 to 52 3/4; Amgen declined 1 1/2 to 61 1/4; and Applied Materials was off 2 1/8 to 51 5/8.

* Rising bond yields caused a number of banking issues to decline, including Chase Manhattan, off 3 3/8 to 106 1/4; BankAmerica, down 3 5/8 to 119 3/8; NationsBank, off 1 1/4 to 63 3/4; and Citicorp, down 1 3/4 to 124 5/8.

* Among the day’s most active stocks was Nike, down 1/2 to 66 1/2, which at one point lost 4 points amid speculation that Woolworth’s Foot Locker chain had cut orders. Woolworth denied the rumor, and Nike shares battled back. Woolworth advanced 7/8 to 22 3/8.

* One day after the government moved to block its merger with office retailer Staples on antitrust grounds, Office Depot gained 2 1/4 to 19 3/8, on reports that Staples resumed negotiations to sell some stores to rival OfficeMax in order to win approval. Staples was unchanged at 23 1/4, and OfficeMax was unchanged at 13 1/4.

Overseas, Tokyo’s Nikkei stock average rose 0.8%, Frankfurt’s DAX index rose 0.7% to a record, and London’s FTSE-100 rose 0.2% to a new high.