Concern over rates, dollar slices 25 points off Dow

NEW YORK — NEW YORK -- U.S. stocks declined yesterday amid concern that higher interest rates will hurt corporate earnings. Lingering concern about the weak dollar also hurt stocks, traders said.

The Dow Jones industrial average dropped 25.68, to 3,699.09, closing below 3,700 for the first time since May 16.


Automobile and computer shares led the decline, the market's fourth slump in the past five days.

"There's nervousness about the likely level of economic activity in the second half of the year," said Christie McClellan, managing director of Robertson, Stephens & Co. "It's the kind of market where buyers turn into sellers in a moment."


The Dow industrials closed lower after rising as much as 16.49 earlier yesterday, as losses in Sears, Roebuck & Co., General Motors Corp. and Philip Morris Cos. outweighed gains in Eastman Kodak Co. and General Electric Co. On Wednesday, the average rose 16.80, its first gain in the previous four days.

The Standard & Poor's 500 index, paced by automobile, semiconductor, software and tobacco shares, closed down 3.46, at 449.63. It rose as much as 1.07, to 454.16, earlier in the day.

The Nasdaq combined composite tumbled 11.89, to 700.85, fueled by declines in Cisco Systems and Microsoft Corp. Earlier in the day, the index rose as much as 1.27, after climbing 3.95 Wednesday.

The American Stock Exchange market value index dropped 1.97, to 431.25.

Two stocks fell for every one that rose on the New York Stock Exchange. Trading was moderate, with about 256 million shares changing hands on the Big Board.

Bucking the trend, the Dow Jones transportation average rose 4.64, to 1,625.48, led by UAL Corp. The parent company of United Airlines soared $3.50, to $125, amid optimism that shareholder approval of the proposed employee buyout of United will boost the stock, traders said.

Auto, computer networking, software, semiconductor, and tobacco stocks were among the biggest decliners in the S&P; 500.

Automakers dropped amid concern that June sales will be weaker than May's, partly in response to this spring's rise in interest rates. "Whenever the market gets an interest-rate cold, the auto group catches pneumonia," said David Healy, an analyst at S. G. Warburg & Co.


General Motors Corp. shed $1.625, to $50.75; Ford Motor Co. lost 87.5 cents, to $57.375; and Chrysler Corp. fell 50 cents, to $47.50.

Technology companies fell amid doubts about the industry's earnings prospects.

Cisco Systems Inc., the most actively traded U.S. stock, dropped $2.50, to $21. A SoundView Financial Group analyst lowered the maker of computer networking products to "hold" from "buy" yesterday, saying Cisco faces increased competi tion that may hurt its profit margins.

Philip Morris Cos. Inc. fell $1.25, to $51.125, amid a House panel's probe into whether tobacco companies raise the nicotine content of tobacco through genetic engineering.

The slide in technology companies offset advances in Eastman Kodak and General Electric. Their gains buoyed stock prices during a short-lived rally just after the opening, traders said.