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Dow Gives Up 11; Yields Edge Down

September 19, 1996|From Times Wire Services

Computer-related shares lifted the Nasdaq market to its ninth straight gain, but the broader market stumbled again Wednesday, its record-setting momentum sapped by renewed interest rate worries.

The Dow Jones industrial average dipped 11.47 points to 5,877.36, only slightly worse than Tuesday's 0.37-point slip from Monday's record close.

Most broader measures also edged lower on quiet trading that left investors contemplating a report of a larger U.S. trade deficit and a weaker bond market. The yield on the benchmark 30-year Treasury bond slipped to 7.01% from 7.02% late Tuesday.

Still, analysts said it is encouraging that the damage in stocks has been minimal with interest rates back at worrisome levels.

"Stocks have been on a tremendous run and have even managed to hold close to their highs in the face of a bad bond market," said Robert Streed, senior investment advisor at Northern Trust in Chicago. "You can't go up every day."

After rallying on a burst of optimism that economic growth may be moderating and inflation will stay steady, bonds have been weighed down by renewed fears that the Federal Reserve Board will decide it needs to contain pricing pressures by raising its key lending rates, slowing spending and demand. Fed policymakers will meet on Tuesday.

Rising inflation and interest rates make the fixed payoff on existing bonds less attractive, forcing down prices to improve the yield. Higher interest rates can hurt stocks by slowing consumer spending and raising company borrowing costs.

"The big focus has got to be on the Fed meeting," Streed said. "I'm amazed by how little conviction the consensus has regarding whether or not the Fed will raise interest rates. It's causing quite a bit of choppiness in the bond market."

That volatility would normally be enough to jostle the stock market, but the Dow's powerful return to record levels after a four-month detour may be providing some stability.

"There's underlying buying interest there. All eyes are set on that 6,000" for the Dow, said Mike Lyons, a trader at Dean Witter Reynolds. "Investors don't want to miss out on that run if it takes place."

Declining issues outnumbered advancers by an 11-8 margin on the New York Stock Exchange, where volume totaled 395.82 million shares, down from Tuesday's pace.

The Standard & Poor's 500-stock index fell 1.47 points to 681.47.

But the Nasdaq composite, whose many small and speculative issues have lagged the market's rebound from July's rout, rose 2.40 points to 1,205.71. It was the ninth straight advance for the technology-laden index, which is creeping closer to the record high of 1,249.15 points set June 5.

The Nasdaq advance was again led by computer-related shares, which benefited from continuing enthusiasm over Intel's upbeat earnings forecast and from various company presentations at a technology conference sponsored by the securities firm Donaldson, Lufkin & Jenrette.

Intel, which jumped nearly 6 points Tuesday, rose 1 3/8 on Wednesday to 95 5/8, and Microsoft rose 2 5/8 to 136 1/2. But some leading computer makers suffered profit-taking after Tuesday's big gains. Dell fell 2 3/8 to 80 5/8, and Gateway 2000 fell 1 9/16 to 80 5/8.

Among market highlights:

* International Network Services, which provides services for complex enterprise networks, soared 92% or 14 3/4 points to 30 3/4 in its Wall Street debut.

* Olsten lost 3 3/4 to 22 7/8 one day after the stock of Manpower, the world's largest private employment agency, tumbled on a warning that analysts' 1996 earnings estimates for the company were too high.

* Tambrands rose 1 1/8 to 42 7/8 after it announced a restructuring.

* Netscape lost 3 3/8 to 42 5/8. Merrill Lynch downgraded the stock, saying the company's recent new products are "sound first steps, but much more is needed to compete in the long run."

Overseas, Tokyo's Nikkei-225 stock average fell 0.8%, Frankfurt's DAX index fell 0.1% and London's FTSE-100 fell 0.4%.

Market Roundup, D6

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