Dow slips 2.53 on concern over rates Computer, software makers post gains in mixed trading

NEW YORK — NEW YORK -- U.S. stocks were mixed yesterday as gains in computer and software issues offset concern that the Federal Reserve may forgo lowering interest rates later this month.

Shares of Hewlett-Packard Co., Sun Microsystems Inc. and Oracle Corp. rose a day after Microsoft Corp. said it will make software applications for the Internet that use their products. Some investors saw Microsoft's move to dominate the global computer network through new product alliances as legitimizing the Internet as a source of big profits.


The Dow Jones industrial average, containing only one computer stock, suffered after a government jobs report failed to settle the debate among investors over whether rates will come down soon enough to spur economic growth and corporate profits.

The 30-stock average fell 2.53 points yesterday to 5,156.86, its second-straight drop after posting three records in a row. For the week, the average climbed 1.4 percent. Among the biggest losers on the day were United Technologies Corp., American Express Co., Aluminum Co. of America and International Paper Co.


Philip Morris Cos. shares declined most, falling $1.375, to $89.25. The Wall Street Journal reported that one of the company's internal memos described nicotine as a "drug delivery system," a description that could weaken some of the tobacco industry's legal defense.

The Standard & Poor's 500 index, which represents about three-quarters of the value of all stocks traded in the U.S., rose 1.31, to 617.48. The index's biggest gainer was Hewlett-Packard, whose shares vaulted $4.625, to $86.875. The gain in computer, software and semiconductor issues offset losses in telecommunications, household products and tobacco stocks.

The Nasdaq composite index, filled with technology shares, jumped 9.24, to 1,062.41. Among advancing issues, Microsoft rose $4, to 94.50; Oracle surged $2.375, to $46.625; Intel Corp. gained $1.75, to $63.25; and Sun Microsystems jumped $6.625, to $99.75.

Advancing stocks matched decliners on the New York Stock Exchange, where 327 million shares traded hands, above the three-month daily average of 365 million.

Preventing bigger gains in stocks was concern that the Fed's policy-making committee won't cut rates at its Dec. 19 meeting. The absence of a balanced budget agreement between the Clinton administration and Republican lawmakers gives the Fed less reason to trim interest rates, investors said.

The Dow industrials have gained about 6.3 percent in the past month on the bet that falling rates will enable the economy to extend its expansion into a sixth year. Companies in all areas of the economy would benefit from lower borrowing costs, which give businesses and consumers more incentive to spend money.

Even if the Fed doesn't cut rates, plummeting bond yields may be enough to spur corporate profits higher, some investors said. The yield on the benchmark 30-year Treasury bond fell to 6.05 percent yesterday from 6.08 Thursday, almost 200 basis points below its yield of 7.88 percent when the year began.

Microsoft's gain was a loss for some companies that make Internet software. Thursday, the Redmond, Wash.-based company unveiled products that let customers tap the Internet for information and let merchants set up shop.


Among yesterday's losers, Netscape Communications Corp. fell $4, to $128.50; UUnet Technologies Inc. slipped $3.75, to $55; Netcom On-Line Communication Services Inc. dropped $3.75, to and Sierra On-Line Inc. shed $2, to $28.50.

Spyglass Inc., which said Thursday that it extended the license of its Mosaic technology for browsing the Internet to Microsoft, saw its shares rise $2.75, to $98.

The Amex market value index slid 0.16, to 535.55; and the S&P; 400 midcap index rose 0.64, to 217.83.