Stocks unmoved by lower rates Dow is off 0.54

NEW YORK — NEW YORK -- Signs of lower interest rates failed to help stocks yesterday.

The NASDAQ Combined Composite index of smaller over-the-counter stocks declined 0.55, to 634.37, ending a six-day rally. Intel, U.S. Healthcare, Food Lion and Oracle Systems accounted for much of the slide.


"The NASDAQ has come a long way, and it needs a breather," said Jon Groveman, president of Ladenburg, Thalmann & Co.

The Dow Jones industrial average declined 0.54, to 3,239.79, while the Standard & Poor's 500 index gained 0.67, to 422.87. Advancing stocks outnumbered declining issues by a narrow margin on the New York Stock Exchange. Trading was active, with 227 million shares changing hands on the Big Board.


Stocks slumped even though the 30-year Treasury bond rose more than 3/4 point. The 30-year bond surged on news that the final leg of the Treasury's $37 billion refunding attracted more demand than expected. The Treasury sold $10.25 billion worth of 30-year bonds.

"The success of the bond auction drove bond prices higher, but thestock market lagged behind," said Peter Canelo, market strategist at County NatWest Securities. "It's surprising that the stock market isn't reacting more positively to the bond market."

Stocks also ignored a move by France to cut its key intervention rate to 9.10 percent, from 9.35 percent. France's decision prompted hopes that other European countries will also lower interest rates. Meanwhile, an official at Japan's Ministry of International Trade and Industry said short-term interest rates are too high, raising speculation that Japan might also lower rates.

Britain's FT-SE 100 index rose 1.1 percent, to 2,726.40, and France's CAC 40 index gained about 1.4 percent, to 1,821.51. Japan's Nikkei 225 index closed 0.36 percent higher, to 16,376.93.

"People can't seem to look past the problems at IBM and General Motors," Mr. Groveman said. "These companies literally have billions of dollars worth of problems. Until people look past these problems, stocks aren't going to go much higher."

Union Texas Petroleum, the most actively traded stock, declined 12.5 cents, to $18.50, after Allied-Signal sold its remaining 30 million shares in Union Texas Petroleum.

Medco Containment gained 12.5 cents, to $34.875, after the company said it had dropped its merger agreement with Diagnostek, based on "material breaches" of the agreement by Diagnostek. Diagnostek, which fell $4, to $6.75, asserted that MedcoContainment had wrongfully terminated the merger.

Merck rose 87.5 cents, to $45.75. Investors have concluded that President-elect Bill Clinton will not push through health-care reforms as fast as previously suggested.


General Motors rose 37.5 cents, to $30.50, on news that the world's largest automaker expects to save $5 billion by 1995 from reductions in employment and material costs.