NEW YORK -- Stocks closed mixed yesterday as concern about a stream of initial public offerings offset optimism about the economy and about the likelihood that the North American Free Trade Agreement will pass a congressional vote next week.
Telephone, tobacco and computer stocks rose for most of the day. Then a late bout of selling in oil, household-product, auto and bank issues drove down the broad market.
The Dow Jones industrial average fell 1.12, to 3,662.43, led by declines in Chevron Corp. and Sears, Roebuck and Co. Earlier, the Dow had risen 16 points on the strength of rallies in American Telephone & Telegraph Co., International Business Machines Corp. and Philip Morris Cos.
"There's a very heavy new-issue calendar" of IPOs and secondary sales of new stock, said James Andrews, vice president for institutional trading at Janney Montgomery Scott in Philadelphia.
With so many sales of new stocks pending, "the issue now is, 'Is there new money coming in to feed' " the market? said Grace Messner, vice president for equity management at Wilmington Trust Co. The market "is trying to rally," she said, but yesterday's late decline "suggests that buying power is starting to wear out."
Declining stocks exceeded advancing issues on the New York Stock Exchange by a margin of about 9-to-7. Volume on the NYSE was an active 287 million shares.
Among broader market indexes, the Standard & Poor's 500 Index fell 1.06, to 462.66. The Nasdaq Combined Composite Index gained 2.40, to 778.98, led by Tele-Communications Inc., DSC Communications Corp. and Cisco Systems Inc. The American Stock Exchange Market Value Index rose 1.28, to 477.98.
Traders attributed yesterday's initial upward move largely to a belief that NAFTA's chances of being approved by Congress are improving. Passage of the agreement would indirectly help the economy and strengthen President Clinton's authority, traders said.
The House of Representatives is scheduled to vote on the free-trade agreement on Wednesday. Action in the Senate will follow if the House approves the measure.
NAFTA alone would not be enough to support the market without recent upbeat economic reports, said Barry Berman, head trader at Robert W. Baird & Co. Semiconductor sales were stronger than expected, consumer prices matched forecasts and wholesale prices dropped a surprising 0.2 percent.
Telefonos de Mexico rose $1.25, to $53.625, amid hope that NAFTA will be ratified. Consorcio Grupo Dino rose 62.5 cents, to $21.50.
Stocks could still weaken because of questions about the number of new stocks being sold and concern that interest rates could rise.
The yield on the 30-year Treasury bond remained at 6.20 percent yesterday as bond trading was limited by the Veterans Day holiday.
Wednesday's reaction in the bond market to the announcement that consumer inflation in October matched expectations, rising 0.4 percent, "wasn't that great, so I suspect we have hit a major bottom in bond yields," Mr. Solloway said. "The question is how quickly will rates move up."
Rising long-term interest rates make stocks less attractive relative to fixed-income securities and raise concern that mutual-fund investors will withdraw some holdings from the stock market.
Meanwhile, a rebound in Nasdaq stocks and enthusiasm for initial public offerings like Boston Chicken Inc. were bearish signals, Mr. Solloway said. "That doesn't necessarily mean we're going to fall off a precipice, but it is an indication that there isn't going to be much upside," he said.
Boston Chicken Inc., which soared $28.50 on Tuesday, dropped $4.50 yesterday, to $42. Shares of the restaurant chain are "reasonably valued," according to a report in the Wall Street Journal's "Heard on the Street" column, which cited Stacy Dutton, an analyst at Kidder, Peabody & Co.
Boston Chicken's rise earlier this week "is an indication of a top of the market," said Mr. Andrews of Janney Montgomery Scott.
IBM jumped $2.125, to $52. The computer maker, in an effort to streamline its businesses, said it is considering selling its Federal Systems Co. unit.
AT&T; rose $1.375, to $56.75. Pacific Telesis Group said it would spend $16 billion in the next seven years to build a voice, data and video service in its region. About $5 billion of the project's budget is set to be awarded to AT&T;, the Journal reported. Separately, Bell Atlantic Corp. said it might boost the value of its network upgrade to $20 billion, from $15 billion.
Pacific Telesis fell $1.375, to $55.25. Bell Atlantic rose 25 cents, to $62.375.
Philip Morris, which rose $1.25, to $56.625, was raised to "buy" from "moderate outperformer" and "hold" at Goldman, Sachs & Co. and Salomon Brothers, respectively, amid expectations of cigarette price increases and stronger earnings.
Cigarette maker Lorillard Inc. raised prices by 4 cents a pack yesterday, after similar increases by R.J. Reynolds earlier this week.