Stocks can't hold earlier gains Dow industrials close 4.34 lower; Fannie Mae surges

NEW YORK — NEW YORK -- U.S. stocks were mixed yesterday, ending three days of gains. Expectations that the Federal Reserve will continue to lower interest rates helped boost bank and financial shares, countering a drop in metals stocks.

The gain in financial stocks was led by shares of the Federal National Mortgage Association, which rallied $5.25 to a record $125 after the company said it will buy back up to 9 percent of its common stock.


The Dow industrials fell 4.34 to 5,105.92 after gaining as much as 16.25 points earlier. The 30-stock average had gained about 51 points, or 1 percent, during its three-day advance. Shares of Merck & Co., Aluminum Co. of America, AlliedSignal Inc. and General Motors Corp. fell the most yesterday.

The Standard & Poor's 500 index rose 0.23 to 614.53 after gaining 2.34 to 614.3 Tuesday. Shares of BellSouth Corp. rose $1.125 to $43.625, Philip Morris gained $1.25 to $90.75 and Exxon Corp. added 50 cents to close at $82. The Nasdaq composite index fell 1.24 to 1,048.13 after rising 2.3 percent during the previous three days.


The Russell 2000 index of small capitalization stocks rose 1.24 to a record 314.07; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, jumped 3.42 to 6,030.76.

About 252 million shares traded on the New York Stock Exchange, less than the three-month daily average of about 374 million. Advancing stocks outpaced decliners by about 13 to 10 on the Big Board.

About 384 million shares traded on the Nasdaq stock market, sending this year's volume over the 100 billion-share mark. The old record was 74 billion in 1994.

The most active stocks in U.S. composite trading were Pacific Telesis Group, Kmart Corp., Intel Corp., Cisco Systems Inc. and Micron Technology Inc.

Among financial stocks that gained, Bankers Trust New York Corp. rose $1.25 to $67.50, First Chicago NBD Corp. added $1.625 to $39.875, Allstate Corp. rose 75 cents to $41.625, Federal Home Loan Mortgage Corp. gained $1.75 to $83.375, PNC Bank Corp. added $1.375 to $31.50 and Travelers Group Inc. added $2.375 to $62.75.

Among declining stocks, Microsoft Corp. fell $1.375 to $88.875, Intel Corp. slid 50 cents to $58.875 and Oracle Corp. dropped 87.5 cents to $43.50.

Aluminum and copper stocks stumbled amid concern that demand may fall as 1996 begins. Alcoa dropped $1.75 to $49.75, Phelps Dodge Corp. slid 75 cents to $60.50, Reynolds Metals Co. dropped $1 to $53 and Cyprus Amax Minerals Co. weakened 75 cents to $25.875.

Telephone shares rose for a second day.


In addition to BellSouth, telephone stock gainers included SBC Communications Inc., which rose 50 cents to $57.875; Bell Atlantic Corp., up 25 cents to a record $67.125; and Nynex Corp., which gained 12.5 cents to $51.875.

Shares of companies whose profits swing with the economy's health fell after the National Association of Realtors said home resales dropped 1.7 percent last month. The Morgan Stanley index of 30 so-called cyclical stocks fell as much as 1.26 to 337.75. Adding to woes for auto stocks was a report that the industry's earnings could be weaker than expected in 1996.

GM's shares fell 50 cents to $51.125, Chrysler's stock dropped 37.5 cents to $54.75 and Ford Motor dropped 62.5 cents to $29.

Among the biggest losers on the day was Safety 1st Inc., whose shares fell $4.125 to $15.125. The maker of child-care products expects to report a fourth-quarter loss of as much as $2.1 million, or 29 cents a share. The company was expected to earn 22 cents.

Another big decliner was Cordis Corp. The medical-device maker's stock fell $11.25 to $95.25 after Johnson & Johnson extended the review period for its planned $1.8 billion acquisition of Cordis to Jan. 22.