Dow tumbles another 72 points Big stocks finish worst month in 7 years, but small shares rise

THE BALTIMORE SUN

NEW YORK -- U.S. stocks fell yesterday, concluding their worst month in seven years, on concern that Coca-Cola Co. and other big stocks that led the market's surge to records are too expensive, given their earnings prospects. Small and computer-related stocks rose.

"Investors continue to take money out of the big stocks, which have had the biggest gains in recent years," said Bill O'Hearn, a money manager with Anchorage-based McKinley Capital Management, which oversees $1.2 billion. "They're flocking to the computer stocks, which they think will have better-than-expected earnings."

The Dow Jones industrial average fell 72.01 to 7,622.42, while the Standard & Poor's 500 index dropped 4.20 to 899.47. For the month, the Dow dropped 7.3 percent and the S&P; 500 lost 5.7 percent, the worst month for both since August of 1990, a recession year.

Big stocks such as Coke, Procter & Gamble Co., Merck & Co., McDonald's Corp. and Gillette & Co. all fell more than 10 percent this month. Coke was the worst loser in the Dow; it fell 18 percent.

By contrast, the Russell 2,000 index of small stocks rose 1.84 to 423.43, its third straight record, bringing its monthly gain to 2.2 percent. The Nasdaq composite index, packed with computer stocks, rose 6.00 to 1,587.32 yesterday, and fell 0.4 percent for the month.

Among other broad market indexes, the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, dropped 21.80 to 8,679.98; the American Stock Exchange composite index slid 0.53 to 650.16; and the S&P; 400 mid-cap index gained 0.80 to 313.97.

O'Hearn said he bought shares of Compaq Computer Corp. yesterday. Compaq rose $1.50 to $65.50. He said the cut in federal capital gains taxes continues to drag down stocks, by making it more lucrative for money managers to sell shares that have appreciated.

To be sure, while August was a terrible month for the Dow and S&P; 500, there have been more painful four-week periods. For example, the Dow fell 9.8 percent from March 11 to April 11 this year.

Barnett Banks Inc. was one of the day's biggest gainers, soaring $13.3125 to $68.125 after it agreed to sell itself to NationsBank Corp. for $14.6 billion. The transaction values Barnett at $70.88 a share, a 29 percent premium over Thursday's closing price. NationsBank fell $3.5625 to $59.75, leading the S&P; 500 lower.

Stocks rallied during the session, then retreated.

"The market is telling you, investors have no conviction," said Marion Schultheis, a money manager with American Express Asset Management in Minneapolis, which oversees $8 billion.

Stocks fell with bonds after reports on new home sales, consumer spending and Midwest manufacturing suggested that the economy may be growing fast enough to incite inflation and prompt the Federal Reserve to raise interest rates.

The yield on the benchmark 30-year Treasury bond rose to 6.60 percent from 6.57 percent Thursday.

"The market is still overvalued, and I think it will fall further," said Paul Rich, a trader at BT Brokerage in New York.

Pub Date: 8/30/97

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