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Dow fades as dollar soars, but broader market rebounds

NEW YORK: Blue-chip stocks fell again on Tuesday as investors worried that higher interest rates and the dollar's rise could hurt corporate profits.

The Dow Jones industrial average fell 33.96 points to close at 5,560.41, just a day after dropping 89 points in response to the government's surprisingly strong March jobs report released Good Friday.

The broader market snapped back from Monday's tumble, however, and gainers beat losers 1,401 to 969 on heavy volume of 421 million shares on the New York Stock Exchange.

Blue-chip stocks were pressured by weakness in multinational companies after the dollar climbed to a seven-month high against the German mark.

"The dollar is about to break out, which is giving Procter & Gamble and Johnson & Johnson difficult times," said Peter Green, a Gruntal & Co. technical analyst. "Given the fact the Dow has many multinational corporations that is what is affecting it."

The dollar climbed to a seven-month high against the German mark and also hit a 26-month high against the Japanese yen in overnight Asian trading.

"Multinational companies are getting it from two fronts. Their earnings stream from overseas is countered by selling in economies that are not growing.

"And whatever earnings you make there are translated to dollars and you get fewer dollars," said Tom Carpenter, ASB Capital Management's chief economist.

Among multinationals losing ground were Dow components Boeing Co., off 3/4 to 82-1/8, IBM, off 1-1/4 to 118-1/8, Coca-Cola Co., off 3/8 to 81-7/8, and Procter & Gamble, off 1-5/8 to 83. Johnson & Johnson, which is not a Dow component, lost 7/8 to 91-1/4.

The technology-laden Nasdaq Composite index rose 3.49 points to 1,109.15 after falling 13 points on Monday.

Larry Wachtel, a market analyst at Prudential Securities, said stocks overall continued to benefit from rotation as investors weaved in and out of sectors rather than cashing out. "People still want to own stocks -- it depends where you want to go. Each group has a story and an aspect that betrays the nonsense of watching the Dow" gyrate.

"It's got to be something profound (for investors to flee equities) like a rate spiral or a profit disappointment trend," he said.

The key 30-year Treasury bond snapped back from two days of heavy selling, rising 13/32 to yield 6.84 percent, vs. 6.93 percent at Monday's close.

Nonetheless, some interest-rate sensitive stocks continued weaker. Freddie Mac shares lost 2-5/8 to 84-1/2, Sallie Mae was off 2-1/8 to 77-3/8 and Aetna fell 1-3/4 to 71-3/4.

Fannie Mae lost 1-7/8 to 31. Oppenheimer downgraded the stock Tuesday and Lehman Brothers cut the stock Monday.

B F Goodrich rose 1-7/8 to 41-3/8. Morgan Stanley upgraded the stock on recent price weakness.

Oracle lost 1-3/4 to 41-1/2. Alex Brown and SoundView downgraded the stock. Analysts said the warp speed of growth in the database software industry may be slowing slightly after rival Informix Monday issued an earnings warning.

Informix rose 5/8 to 19 after Monday's 7-1/8-point drop.

HBO & Co. jumped 10-1/8 to 110-7/8 after reporting a jump in first-quarter earnings.

The Standard & Poor's composite index of 500 stocks fell 2.05 to 642.19. The American Stock Exchange index rose 2.23 to 572.71.

The NYSE composite index lost 0.52 to 345.13. The average price per share fell 5 cents.

The Wilshire Associates Equity Index -- the market value of NYSE, American and Nasdaq issues -- was 6,347.674, down 5.286 or 0.08 percent.-Reuter