NEW YORK -- U.S. stocks fell yesterday amid concern that corporate profits won't beat expectations for the rest of this year because of weak economic growth. That outlook helped steady-earning drug, food and health care companies.
Federal Reserve policy-makers decided against reducing U.S. interest rates yesterday, suggesting they are content to let the economy expand at a slower pace. Expectations that profits would surpass estimates in the third and fourth quarters helped send stocks to record highs this month.
The Dow Jones industrial average fell 4.33, to 4,765.60, after rising to 4,798.11 earlier in the day. It was the 30-stock average's sixth drop since it registered a record 4,801.80 eight sessions ago. Shares of Boeing Co., Texaco Inc. and Exxon Corp. fell the most, offsetting gains in Philip Morris Cos., United Technologies Corp. and AT&T; Corp.
United Technologies' stock rose for a second day, closing up 87.5 cents, at $86, after gaining as much as $1.875. Rival General Electric Co. is having trouble developing its new GE90 jet engines, which could benefit United Technologies' Pratt & Whitney engine division, traders said. GE's stock, also one of the Dow industrials, fell 12.5 cents, to $64.25.
The broader Standard & Poor's 500 closed down 0.4, at 581.41, after rising to 584.66. Countering the gains in drug, health care, telephone and food issues were drops in oil, semiconductor and software shares.
Oil company shares declined as expectations grew that U.S. inventories of crude oil, heating oil and gasoline rose last week because of rising imports and increased refinery production. Crude for November delivery fell 15 cents, to $17.32 a barrel, continuing a recent decline.
Among oil issues, shares of Texaco Inc. fell 87.5 cents, to $64; Mobil Corp. dropped $1.50, to $97.75; Chevron Corp. weakened 75 cents, to $48.625; Exxon Corp. slid $1, to $71.75; and Atlantic Richfield Co. dropped 62.5 cents, to $107.625.
The Nasdaq composite index fell 8.10, to 1,038.05, the seventh drop in nine sessions. Shares of Microsoft Corp. fell $1.9843, to $88.25; Oracle Corp. slid 75 cents, to $38.375; 3Com Corp. slipped $1.625, to $45.50; and Dell Computer Corp. dropped $4.75, to $82.25.
About 12 stocks fell for every 11 that rose on the New York Stock Exchange, where more than 363.6 million shares changed hands. The Big Board's three-month daily average is 339 million shares.
Among broad market indexes, the Russell 2000 index of small capitalization stocks fell 1.2, to 308.96; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, slipped 8.36, to 5,774.95; the Amex market value index dropped 1.85, to 542.53; and the S&P; 400 midcap index slid 0.33. to 214.07.
Yesterday's most active stocks in U.S. composite trading were Intel, Micron Technology Inc., AT&T;, Glaxo Wellcome Plc's American depositary receipts and Microsoft.
For the second straight meeting, the Fed left the federal funds rate on overnight bank loans unchanged at 5.75 percent.
While investors didn't expect a cut in interest rates, the Fed's inaction cemented the belief that economic growth won't pick up enough during the remaining three months of 1995 to be a catalyst for higher profits, traders said.
Among the biggest gainers on the day, Bristol-Myers Squibb Co. rose $1.375, to $74.25; Abbott Laboratories jumped 75 cents, to $43.50; Warner-Lambert Co. surged 87.5 cents, to $96.875; General Mills climbed $1.875, to $55.25; Kellogg Co. rose $1.25, to $73.125; Pfizer Inc. rose 25 cents, to $53.125; and American Home Products Corp. rallied 50 cents, to $85.75.
Shares of regional Bell operating companies rose after BellSouth Corp. raised its quarterly dividend 4.3 percent and split its stock 2-for-1. With an uncertain outlook for profits, the Baby Bells' big dividends are growing more attractive, traders said.