Wall Street continued to focus on the downside of growth Wednesday, as stocks sagged and bond yields jumped on more good economic news.
News that factory orders rose 1.1 percent in March, double the rate economists had forecast, caused concern once again over inflation, or at least the greater possibility of another interest rate hike by the Federal Reserve Board.
The Dow Jones industrial average closed off 16.66 at 3697.75 on moderate Big Board volume of 268 million shares. The Nasdaq index closed up 0.93 at 740.30.
The stock drop may be “a prologue to further damage,” said Michael Metz, chief market strategist at Oppenheimer. Continuing increases by the Fed in interest rates eventually will slow the economy, taking the bloom off corporate earnings, which have been coming in at surprisingly high levels for the first quarter.
“The Fed is trying to slow down the economy, and frankly I think they will succeed,” said Metz. “The optimistic earnings expectations for the balance of 1994 and for 1995 may be too high.”
Cyclical stocks were among the day’s casualties. Maytag lost 37 cents to $18.87, Knight-Ridder fell $1.12 to $58.87, Ford dropped $1 to $60, and Phelps Dodge lost 75 cents to $56.37.
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Oil stocks took a second day of drubbing as investor interest in their high dividend yields flagged on expectations of higher interest rates.
Amoco lost 37 cents to $55.62, Chevron fell 87 cents to $87.12, Exxon dropped 62 cents to $60.62, and Royal Dutch Petroleum lost $1.87 to $105.75.
“Many of the larger companies are major yield plays,” said Doug Terreson, an oil analyst at PaineWebber. Chevron’s dividend, for example, is a yield of 4.27 percent, compared with 2.82 percent for the S&P 500.
Time Warner, object of takeover rumors late Tuesday, fell 37 cents to $39.62 after it announced a restructuring. The entertainment company said it will cut costs, reduce capital spending by $100 million and freeze hiring in 1994.
The yield on the benchmark 30-year Treasury bond climbed as high as 7.39 percent from a morning low of almost 7.30 percent. The yield closed at 7.34, unchanged from the previous day.
Investors seemed worried, too, by the recent decline of the dollar, though the Fed intervened strongly during the day. Eventually, a weaker dollar makes imports so much more expensive it helps ignite inflation, though analysts said that moment seems a long way off.
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Telular of Buffalo Grove got the nicest kind of buy recommendation Wednesday when Motorola announced it will exercise an option to purchase an additional $12 million in stock, bringing Motorola’s share of Telular to 20 percent from 18 percent.
Motorola will purchase 928,749 shares of Telular stock for $12.94 per share from certain major Telular shareholders. The company sold 4 million shares to the public at $20 a share on Jan. 27. The company has 24 million shares overall.
Motorola and Telular have had cross-licensing agreements for some time for development and marketing of fixed wireless technology. Telular specializes in interface technology that switches phone systems, fax, computer modem or other wireless services.
Telular’s stock rose $2 to $14.25 on that and other company news.
Telular also announced a $2 million order from Northern Telecom for its products. The sale represents the first order under an ongoing agreement signed in March for Northern Telecom to distribute Telular products internationally, and for co-development of products.
Telular also reported results for the first three months of the year, showing a loss $7.2 million, or 32 cents a share. The company had sales of $4.7 million, up from $1.6 million a year earlier.
Premark International of Deerfield announced a 2-for-1 stock split for shareholders of record as of June 16. The company, maker of Tupperware, also raised the quarterly cash dividend to 43 cents from 28 cents.
Premark stock was off 12 cents at $75.50.