NEW YORK -- U.S. stocks closed mixed yesterday, ending a three-day advance, as rising drug and paper stocks offset falling oil issues.
Drug stocks, down for most of the day, got a late boost when American Home Products Corp. offered to buy American Cyanimid Co. for $95 a share.
The takeover "is going to help the [drug] group and help the market" by showing there's plenty of value left in stocks that many investors believe are already priced too high, said Richard Ciardullo, head trader at Eagle Asset Management in St. Petersburg, Fla. "Every day, either a company is buying its own shares or buying somebody else."
The Dow Jones industrial average fell 1.95, to 3,796.22, after rising as much as 12.30. Losses in Texaco Inc., Exxon Corp. and Chevron Corp. swamped advancing prices for International Paper Co. and Union Carbide Corp.
Among broader market indexes, the Standard & Poor's 500 index fell 0.45, to 460.46. Weak oil, beverage and regional bank stocks were matched by rising drug, paper, chemical and utility stocks.
About four stocks rose for every three that fell on the New York Stock Exchange.
Stock prices got some help from a government report showing slackening sales of new houses in June, signaling slower economic growth and suggesting the Federal Reserve will be less likely to raise interest rates at a policy meeting on Aug. 16.
Sales of new homes dropped 14.1 percent in June, to an annual rate of 591,000, the lowest in two years, the Commerce Department said.
Yields on the 30-year Treasury bond fell as low as 7.34 percent, from 7.40 percent Monday, as the dollar rallied 0.94 Japanese yen, to 100.35, and 0.13 pfennig, to 1.5795 German marks. But the yield climbed later in the day to close unchanged from Monday.
The dollar's advance, fueled by expectations that the U.S. and Japan will resume trade talks, means the Fed is less likely to raise rates to prop up the currency.
House sales are "weak enough that it's going to be a significant stumbling block to the Fed tightening" credit policy by raising interest rates at its next policy meeting, said William Lord, head trader at UBS Securities.
American Home's offer for American Cyanimid came exactly three months after Switzerland's Roche Holding Ltd. agreed to buy Syntex Corp. for $5.3 billion.
In response, drug and health-care stocks climbed after falling for most of the day. Schering-Plough surged $3.50, to $66.25; Pfizer Inc. climbed $2, to $63.50; Upjohn Co. vaulted $1.875, to $31.875; Eli Lilly & Co. advanced $1.25, to $49.625; and %o Warner-Lambert Co. soared $4.375, to $68.50.
Paper stocks rose for a third day after Stone Container Corp. said it will raise the price of linerboard by as much as $40, or 10 percent a ton, to $425 on Sept. 1, the fourth increase in the past year. The stocks also got a boost from growing optimism that economic growth in the Far East and Europe as well as North America will increase demand for paper and cardboard boxes.
West Texas crude oil for delivery in September fell 41 cents a barrel, to $20.14, amid speculation that tensions surrounding a month-old oil strike in Nigeria might be easing.
International oil companies that are the most diversified overseas suffered the most. Mobil Corp. fell $1.50, to $83.75; Chevron Corp. declined 62.5 cents, to $43.50; Exxon dropped 87.5 cents, $59.25; Texaco lost $1, to $62.625; and Royal Dutch Petroleum fell $1.125, to $111.75.
Steel stocks rose for a third day, lifting the Standard & Poor's Steel Index to a 35-year high, amid signs that larger-than-expected price rises will boost profits later this year and next.