NEW YORK -- Stock prices closed lower yesterday after tumbling late in the day, as computer-guided sell orders compounded disappointment over a report on manufacturing activity.
The market's retreat was paced by tobacco stocks, which resumed their decline after Leon Panetta, director of the Office of Management and Budget, indicated the Clinton administration might be in favor of limiting tax deductions for cigarette advertising.
The Dow Jones industrial average fell 15.40, to 3,355.41, led by declines in Philip Morris Cos. and Eastman Kodak Co. The decline erased about one-third of last week's gain of
48.63 points, or 1.5 percent.
Tobacco stocks have slumped in recent weeks amid concern that President Clinton would propose higher excise taxes on cigarettes to help pay for reform of the nation's health care system. Health care stocks, the other major stock loser of recent months, rallied yesterday.
Broader market indexes also finished lower. Standard & Poor's 500 Index fell 1.36, to 442.02, while the NASDAQ Combined Composite Index lost 1.26, to close at 669.51.
Stock prices were little changed most of the day, as a disappointing purchasing managers report gave investors little motivation to buy stocks, yet falling Treasury bond yields left few alternative investments to equities, traders said.
The National Association of Purchasing Managers said its index of manufacturing conditions fell to 55.8 percent in February from 58 percent in January. Economists had expected a gain to 58.4 percent. Any reading above 50 indicates expansion in manufacturing.
Just prior to the NAPM report, the National Association of Realtors reported home resales slid 6.4 percent in January, compared with expectations for a 1.5 percent drop. December's gain was revised down to 4.7 percent from the original 5 percent.
"A weak economy is not good for stocks because there's less incentive to buy," said Barry Berman, head trader at Robert W. Baird.
Advancing common stocks outstripped decliners by a margin of 8-to-7 on the New York Stock Exchange. Trading subsided from the frenetic pace of 1993's first two months. A little more than 235 million shares changed hands on the Big Board, down from the year-to-date average daily NYSE turnover of about 276 million. Activity continued to be hampered by Friday's bombing and related fires at New York's World Trade Center.
"There's no real volume compared with last week, and there's no real leadership," said Kenneth Ducey, a trader at BT Brokerage. "There are an awful lot of [economic] numbers coming out this week, and there may be a little hesitancy right now to go chasing after stocks."
The key economic report this week will be the employment report for February. Other reports this week include leading indicators, new home sales and factory orders for January.