NEW YORK -- U.S. stocks fell for a second day, led by auto and computer stocks, as signs that interest rates won't move lower anytime soon fueled concern that earnings growth will fall below expectations.
Losses were tempered by gains in Procter & Gamble Co., Merck Co. and Coca-Cola Co., consumer-products companies whose earnings traditionally are stable, even when the economy slows.
Profit warnings by Caterpillar Inc. and Minnesota Mining & Manufacturing Co. earlier this week sparked concern that third- quarter earnings overall will disappoint investors and hurt stocks. Yesterday, analysts lowered estimates on 3M, TRW Inc. and General Signal Corp., among others.
Aluminum Co. of America's shares dropped 87.5 cents, to $53.125, and Boeing Co. shares slipped $1.375, to $70.25, helping push the Dow Jones industrial average down 3.25, to 4,764.15. The average was down 38.65, to 4,728.75, early in the day. For the week, it declined 33.42 points, or 0.7 percent. Eight days ago, the market as measured by the Dow industrials set a record of 4,801.80.
The broader Standard & Poor's 500 index sank 1.27, to 581.73, yesterday. Shares of computer, oil and automobile companies lost the most, while beverage, drug and electrical equipment companies rose.
The technology-laden Nasdaq composite index fell 5.12, to 1,053.39. The index, which set a record of 1,067.4 Sept. 13, was led lower by shares of Microsoft Corp., Intel Corp. and Novell Inc. It posted a 0.22 percent gain for the week.
The Russell 2000 index of small stocks fell 1.55, to 312.05; the Wilshire 5000 index slumped 22.11, to 5,793.04; and the American Stock Exchange market value index was down 3.54, to 547.90.
Some 1,499 shares fell and 761 advanced on the New York Stock Exchange. About 371 million shares changed hands yesterday, compared with 367.03 million yesterday.
Federal Reserve Chairman Alan Greenspan told the Senate Banking committee yesterday that economic growth prospects have picked up since he last addressed the Senate in mid-July. His remarks, coming four days before the Fed's policy-making arm meets to discuss interest rates, suggested that no rate cut is in sight.
Gains in consumer stocks helped the Dow industrials recoup most of their losses later in the day. Procter & Gamble climbed 87.5 cents, to $76.625, and Merck shares rose $1.125, to $57.625. Tobacco company UST Inc. shares gained $1, to reach $29.875.
Morgan Stanley's cyclical index slid 2.63 points, to 346.33, posting a 3 percent decline for the week. The firm's index of consumer companies rose 0.85 to 261.33.
Faltering hopes for a rate cut hurt carmakers. Lower interest rates make it cheaper for consumers to borrow money to buy big-ticket items such as cars. Chrysler Corp. dropped $1.875, to $53.625, while Ford Motor Co.'s stock was down 50 cents at $31. General Motors Co. fell 37.5 cents, to $47.25.
TRW's shares dropped 5.5 percent, or 4.375 points, to $75.375. An analyst at Cowen & Co. cut his rating on the stock to "neutral" from "buy" amid concern the auto parts supplier's earnings will be hurt by a slowdown in auto production.
Shares of banks, whose profit margins increase when rates fall, also slipped. Citicorp's stock was down 75 cents, to $68.625, and J. P. Morgan & Co.'s stock dropped 50 cents, to $76.125.
Shares of Meridian were a bright spot, rising $1, to $39.25. The bank's board will meet next week to review its strategic options, including a possible sale of the company.
The S&P; index of seven large commercial banks fell 1.63, to 224.12 after a 6 1/2 -month rally that drove the index up about 44 percent.
Compaq Computer Corp.'s shares slumped $1.125, to $47, after Lehman Brothers analyst Don Young said the shares won't outperform the overall market. International Business Machines Corp. fell 50 cents, to $93.875.