NEW YORK -- U.S. stocks closed mixed yesterday amid persistent expectations that the Federal Reserve will raise interest rates next week, threatening corporate-profit growth and increasing the appeal of fixed-income investments.
That concern was more evident in broader measures than in the Dow Jones industrial average and the Standard & Poor's 500, both of which eked out small gains. On the New York Stock Exchange, two stocks fell for every one that rose.
Anticipation of today's congressional elections kept trading on the NYSE and Nasdaq stock market slower than usual. Semiconductor, international oil and auto stocks were among yesterday's biggest decliners, while financial services, telephone and household products shares posted the largest gains.
"The market is still afraid of interest rates and inflation," said Michael Metz, chief investment officer at Oppenheimer & Co. "The fear is the Fed will move next week and it won't be the last move."
The Dow industrials zigzagged in a 21.20-point range, before closing up 1.35, at 3,808.87. Advances in International Business Machines Corp., Walt Disney Co. and Coca-Cola Co. outweighed declines in General Motors Corp., Eastman Kodak Co. and Sears, Roebuck & Co.
Trading was slower than usual, with about 256 million shares changing hands on the Big Board, trailing the three-month average of 292 million. Nasdaq trading reached 246 million shares, below the recent daily average of 273 million.
The Standard & Poor's 500 index gained 0.78, to 463.06, recouping a fraction of Friday's 5.63-point plunge. The Nasdaq composite index dropped 3.77, to 762.31, extending Friday's 6.02-point slide.
Shares of Chrysler Corp. dropped 87.5 cents, to $46.50, after investor Kirk Kerkorian indicated he might sell his 9.2 percent stake. Other auto stocks were mixed. GM shed 62.5 cents, to $38.625, while Ford Motor Co. climbed 25 cents, to $29.125.
The Russell 2000 index fell 0.91, to 251.84; the American Stock Exchange market value index dropped 2.50, to 450.41; and the Wilshire 5000 index lost 4.19, to 4,591.82.
Concern that interest rates will rise is replacing optimism over better-than-expected quarterly earnings as the Fed's Nov. 15 policy-making meeting approaches.
"The bulk of superb third-quarter earnings reports are now largely over -- and the market is having a tough time staying on an even keel," said Jeffrey Applegate, chief investment strategist at CS First Boston Corp.
Although the Labor Department on Friday said nonfarm jobs increased by a smaller-than-expected 194,000 in October, investors focused on indications that a drop in the unemployment rate to 5.8 percent and a rise in wages will drive up inflation and interest rates.
On Friday, the Dow industrials slumped 38.36, declining 3.7 percent for the week, amid expectations the central bank would raise the target rate on overnight bank loans, or federal funds, to at least 5.25 percent from 4.75 percent.
Investors turned more positive on electric utility stocks yesterday amid expectations these shares' hefty dividend yields will help insulate investors from losses as rising interest rates drive down stock prices.
The Dow Jones utilities average rose 0.66, to 178.82, yesterday, putting it 30.3 percent below its record closing high of 256.46 reached on Sept. 13, 1993. The price decline since then boosted the average common-stock dividend yield on electric utilities to about 7 percent, said Mr. Applegate, of CS First Boston.
Stocks also were held in check yesterday as investors anticipated today's congressional elections and as yields on some benchmark Treasury securities hovered around their highest level since 1991.