Stocks Fall as Economic Reports Loom
Stocks fell sharply Friday, as investors braced for a series of economic reports next week that are likely to clarify the outlook for interest rates.
The Dow Jones industrial average closed down 53.38 points, or 0.8%, to 6,738.87, after sliding more than 60 points earlier in light trading.
The Dow’s drop trimmed its gain to 35.32 points for the week, as blue chips dipped in each of the three sessions after jumping 173 points Tuesday in the 30-stock index’s second-largest point gain ever.
Broader measures also retreated Friday. The day’s biggest damage came in the struggling Nasdaq Stock Market, where the dominant technology sector pulled back sharply after a three-day winning streak.
Investors mostly brushed off a report that sales of previously owned homes fell 2.8% in March. Far more significant, analysts said, will be next week’s readings on employment costs and manufacturing activity, both major forces behind inflation.
“The numbers [Friday] didn’t change anyone’s mind. The main event is next week,” said David Shulman, chief market strategist at Salomon Bros., who predicted that the reports won’t help ease anyone’s inflation fears.
Investors appeared increasingly reluctant to bid up stocks just ahead of reports on employment and wages, gross domestic product, the National Assn. of Purchasing Management index and the employment cost index, a key wage inflation gauge that may pressure the Federal Reserve Board to raise overnight lending rates.
Bonds were little changed, with the yield on the benchmark 30-year Treasury remaining steady at 7.13%, the same as Thursday.
Declining issues outnumbered advancers by a 2-1 margin on the New York Stock Exchange, where trading volume was moderate.
The Standard & Poor’s 500-stock index fell 5.81 points to 765.37, NYSE’s composite index fell 3.24 points to 400.38, and the American Stock Exchange composite index fell 1.12 points to 542.83. The Nasdaq composite index fell 18.81 points to 1,209.29, down 13.28 on the week.
Among Friday’s highlights:
* Tobacco issues slumped after a federal judge ruled the Food and Drug Administration had the authority to regulate cigarette sales and labeling. Analysts said the ruling may add to tobacco companies’ potential costs to settle massive class-action litigation.
Philip Morris fell 2 1/8 to 39 1/2 as the Dow’s weakest issue and RJR Nabisco Holdings slid 2 3/4 to 28 7/8.
* Leading tech issues relinquished some recent gains. IBM fell 2 7/8 to 150 3/4; Intel fell 2 1/4 to 143 7/8; Dell Computer declined 3 1/2 to 77 3/4; Cisco Systems was off 1 15/16 to 46 3/8; and Gateway 2000 slumped 4 1/2 to 43 7/8.
Electronic Data Systems sank 9 1/2 to 32 1/2 after late Thursday’s disappointing earnings report. Its decline dragged down competitor Computer Sciences, which fell 4 3/4 to 60.
* Ford unit Hertz rose 3 5/8 to 27 5/8 after a $480-million initial public offering for the world’s largest car-rental company. Demand for stock was strong, a bright spot in the otherwise languishing IPO market.
* Telephone issues bucked the downward trend. Bell Atlantic and Nynex gained one day after winning U.S. clearance for their merger. Bell Atlantic rose 5 1/8 to 63 3/4 and Nynex advanced 3 3/4 to 48 1/8. Also rising were BellSouth, up 1 1/2 to 42 3/4; GTE, up 1 3/8 to 44 3/4; and Ameritech, up 2 to 58 5/8.
Overseas, Tokyo’s Nikkei stock average fell 0.5%, Frankfurt’s DAX index fell 0.6%, and London’s FTSE-100 fell 0.4%.
Market Roundup, D4
