Dow drops 3.78, but small stocks gain

NEW YORK — NEW YORK -- Stocks were mixed yesterday as shares of blue-chip companies stumbled while over-the-counter stocks of small companies continued to rally.

The Dow Jones industrial average slid 3.78, to 3,240.06. The Dow was still up 13.78 for the week. The Standard & Poor's 500 index fell 0.77, to 417.57.


Advancing stocks exceeded declining issues by a small margin on the New York Stock Exchange. Trading was active, with about 206 million shares changing hands on the Big Board.

The NASDAQ Combined Composite index rose 2.74, to 616.82. The NASDAQ 100 stock index gained 3.31, to 676.29.


"Money continues to flow into the stock market because of low interest rates," said Ronald Doran, director of institutional trading at C.L. King & Associates Inc. "This trend is going to continue unless long-term interest rates turn suddenly higher."

The yield on the 30-year Treasury bond is up 52 basis points since Sept. 8. So long as the yield does not rise much above its current rate of 7.75 percent, Mr. Doran said, stocks should continue to rise.

Yields on Treasury bonds rose yesterday after the Labor Department's report that non-farm jobs rose by a modest 27,000 in October. The report provided more evidence that the economy is on the mend.

"The high volume of the past few weeks indicates that people are still interested in the stock market," said Sid Dorr, head of institutional equities at Charles Schwab in San Francisco. "The trick is trying to figure out where to put your money."

NASDAQ stocks are benefiting most because small businesses are seen as gaining more tax incentives under the Clinton administration, Mr. Dorr said.

The rally in NASDAQ stocks was led by retail, biotechnology and computer companies. Retail stocks were led by Price Co., which zTC increased $6.50, to $43.75, on rumors that an outside party is interested in acquiring the merchandising business.

In the biotechnology sector, Chiron Corp. advanced $4.375, to $52.875; Biogen Inc. increased $2.75, to $42.25; Gensia Pharmaceuticals Inc. gained $2, to $26.25; and Centocor Inc. rose $1.50, to $13.

Computer stocks continued to gain on expectations that these companies will report stronger-than-expected earnings. Apple Computer rose 75 cents, to $55.75; Oracle Systems Corp. advanced 62.5 cents, to $24.125; and Dell Computer Corp. advanced 62.5 cents, to $37.375.


Food Lion Class A common stock declined $1, to $8.25, after ABC News' "PrimeTime Live" program accused the grocery store chain of unsanitary food preparation. Food Lion called the ABC story "fabricated, biased and poorly researched."

McCaw Cellular fell $1.125, to $30.875, on a report in the Wall Street Journal that shareholders are receiving considerably less money from AT&T; than first believed in a market transaction announced this week. AT&T; gained 50 cents, to $44.875, on expectations that the company will face no regulatory problems in its $3.8 billion investment in McCaw Cellular.