Worried investors drive stocks down

NEW YORK — NEW YORK -- U.S. stocks closed mostly lower yesterday amid renewed concern about the economy after the government reported factory orders fell in July and given the prospect of more bad news in today's report on August employment.

"Investors are again starting to worry about the pace of the recovery," said Michael Landry, president of Mackenzie Investment Management Inc., which oversees about $1 billion.


The slide in stocks was led by shares of retail, paper and automobile companies, which rely on a strong economy for earnings growth. Meanwhile, health care issues rose after the Washington Post reported that President Clinton's health care reform plan would not include mandatory short-term price controls.

The Dow Jones industrial average declined 19 points to 3,626.10. Shares of General Motors Corp., Aluminum Co. of America, Caterpillar Inc. and International Paper Co. accounted for most of the decline.


Standard & Poor's 500 Index fell 1.84, to 461.31. Declining common stocks outnumbered advancing issues by about 8 to 7 on the New York Stock Exchange.

Indexes dominated by smaller stocks moved higher. The Nasdaq Combined Composite Index rose 2.50 to a record 748.65 for a fourth straight session. The American Stock Exchange Market Value Index gained 2.31 to a record 461.28.

Health care stocks rose because some investors were convinced that Mr. Clinton's health care package would impose strict price controls. This concern has helped fuel a 41 percent drop in the S&P; Health Care Index this year.

Yesterday, Merck & Co. rose $1.25, to $33.125, Bristol-Myers Squibb Co. increased 87.5 cents, to $57, Johnson & Johnson gained 50 cents, to $40.875, and Warner-Lambert Co. climbed $2, to $71.25. Schering-Plough Corp. rose $2.50, to $63.125, Pfizer Inc. advanced $2, to $64.75, and Amgen Inc., a biotechnology company, rose $1.625, to $39.125.

Shares of health maintenance organizations also were higher. U.S. Healthcare Corp. advanced $2.625, to $47.125, United Healthcare Corp. gained $3, to $62.125, Foundation Health Corp. rose 50 cents to $22.25, and Oxford Health Plans Inc. soared $6.375, to $72.50.

White House officials responded to the Post's report by saying that mandatory price controls were dismissed as a serious option several months ago by the president and his health policy advisers.

"Meantime, the economic numbers are crummy," said Daniel Marciano, senior vice president at Dillon, Read & Co. "The only thing holding the market together is interest rates."

Long-term interest rates dropped to record levels, as the yield on the 30-year Treasury bond slid as low as 6.03 percent. The decline in rates occurred after the Commerce Department's report on factory orders, which posted their largest one-month drop since December 1991.


The Labor Department is set to release the employment report for August today. Economists estimate that the economy added 145,000 jobs in August, according to a survey by Bloomberg Business News.

But there were expectations after yesterday's report on initial jobless claims that the employment report would show less job growth than forecast, according to Stone & McCarthy Research Associates.

"This market is going to have trouble rising much further given investors' unsettled feelings about the economy," said John Blair, head trader at NatWest Securities Corp.

Trading was active, considering it's the week before the Labor Day holiday, with about 259.8 million shares changing hands on the NYSE.