Rally runs out of steam, with Dow slipping 0.34


NEW YORK -- U.S. stocks were little changed yesterday, ending a five-day rally, as investors interpreted stable interest rates as a sign the economy and profit growth will slow in 1995.

"Wall Street is always thinking a half-year or year ahead, so if it's done worrying about what interest rates are going to do, the next obvious focus is earnings," said James Macko, vice president of institutional trading at McDonald & Co. Investments.

Shares of pollution control, oil and banking issues fell, offsetting gains in chemical, telephone, insurance and broadcast stocks.

Pollution-control companies were led lower by waste-management company WMX Technologies Inc. Its shares fell $1.875, to $27.125, after the company's 26 percent increase in fourth-quarter profit fell short of analysts' expectations, and Merrill Lynch & Co. reduced its estimate for the company's 1995 earnings. WMX's shares were the most active stock in U.S. composite trading, with more than 6.3 million shares trading hands.

The Dow Jones industrial average fell 0.34, to 3,937.39, its first decline in six days. A late round of computer-driven "buy" orders added 8.07 points to the average, according to Birinyi Associates Inc., and helped the average recover from a 12.79-point drop. The average closed at 3,937.73 on Monday -- its highest since 3,953.88 on Sept. 15. Shares of Walt Disney Co., AT&T; Corp. and AlliedSignal Inc. fell the most.

Union Carbide rose 87.5 cents, to $28.75, after the plastics and chemical company announced it has increased its share buyback plan by 10 million shares as a way to preserve the value of its dividend and employee stock-option plan. The stock's rise helped propel the S&P; chemical index up 3.44, to 235.8.

Among broader market averages, the S&P; 500 index fell 0.33, to 480.81, after jumping 2.49 Monday to 481.14, just shy of its all-time high of 482, set on Feb. 2 last year. The Nasdaq composite index rose 0.12, to 778.97, after being up as much as 2.1 shortly after the open. Shares of Intel Corp., U S Healthcare Inc., Sun Microsystems Inc. and Stratacom Inc. fell the most.

Shares of Time Warner Inc. surged $1.25, to $39, after the company agreed to buy Cablevision Industries, a closely held company based in Liberty, N.Y., for stock and the assumption of debt. Time Warner also said it plans to sell assets and split the company into separate entertainment and cable system businesses.

"Even though Time Warner's had a nice run this year, we think it's got plenty of room to move higher," said Jack Baker, managing director for stock trading at Furman Selz Inc. Time Warner's gain helped propel the S&P; broadcasting and media index up 77.14, to 7,386.24.

Stocks have rallied the past five days amid evidence the economy is slowing, making it less likely the Federal Reserve will raise interest rates again soon. But stable rates could turn out to be a mixed blessing, since they probably mean economic growth has subsided and profit growth may slow.

Some investors said that after the past week's gains, stocks were poised to fall. "The market needs to take a little rest," said William Lord, trader at UBS Securities Inc.

Shares of insurance companies rose amid optimism that inflation won't accelerate and that interest rates will stabilize, analysts said. Higher rates hurt insurers' big holdings of bonds, and inflation increases the cost of making good on claims.

American International Group's stock rose 75 cents, to $105.50; CNA Financial Corp. gained 75 cents, to $70.50; and Aetna Life & Casualty Co. added 75 cents, to $52.50.

About four stocks rose for every three that fell on the New York Stock Exchange, where about 381 million shares traded hands in composite trading. Advancing issues have now outpaced decliners six straight days. Stocks staged their broadest rally in 10 months on Friday.

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