Federal Reserve Chairman Alan Greenspan sent the markets lower Wednesday with remarks indicating another round of interest-rate increases may be coming.
After Greenspan told Congress he still sees an inflationary threat, stocks sensitive to swings in the economy, the so-called cyclical stocks, led the way downward.
Caterpillar shed $1.50, to $107.62; Aluminum Company of America fell $1.37, to $80.62; and United Technologies dropped $1.25, to $66.37.
“The present value of earnings goes down immediately when interest rates go up,” said Walter Revis, market analyst at Hamilton Investments.
The Dow Jones industrial average fell 21.04 points to 3727.27 on volume of 268 million shares. The Nasdaq fell 6.55 points to 712.77.
Technology stocks took a drubbing for another day.
Benchmark Intel fell 50 cents, to $56.50; Western Digital lost 50 cents, to $14, a day after announcing spectacular earnings; National Semiconductor fell 62 cents, to $16; and Oracle Systems lost $1.37, to $37.12.
Microsoft, which reported higher earnings for its fiscal fourth quarter, fell $1.75, to $48.37. The company is to meet with analysts Thursday to provide an outlook for the coming year.
Greenspan’s remarks before a congressional committee ended the biggest rally in U.S. government bonds in three months. On the benchmark 30-year Treasury bond, the yield, which moves opposite to price, rose to 7.54 percent from Tuesday’s 7.46.
Heartland report: For several years, stocks of companies involved in waste management have been in trouble.
After running up during the 1980s as environmental concerns became institutionalized, stocks in these companies went into the doldrums when it was discovered what companies could do on their own to clean up.
Businesses discovered it was more cost-effective to limit waste than to pay someone to cart it off. Landfills filled up, and it became more costly to dispose of what waste was generated.
WMX Technologies of Oak Brook has started to buck the trend by cleaning up its own act.
WMX, which reported lower earnings Tuesday, wound up with improved recommendations Wednesday from stock analysts because the company says it’s hustling more. Wall Street loves a turnaround.
“The results mark a major turning point for WMX,” wrote NatWest Securities analysts Paul Knight and Jeff Cohen, in a research report issued Wednesday. “We expect WMX to be a top performer in the solid-waste group as its earnings comparisons improve dramatically.”
The NatWest analysts said WMX’s solid-waste revenue grew 8.1 percent in the second quarter.
Raymond James & Associates analyst William Fisher also raised his recommendation on WMX stock, to “buy” from “hold.”
Dean Buntrock, WMX chairman and chief executive, said improved profitability in WMX’s solid-waste business is largely the result of cost-cutting. WMX last year cut 500 jobs and restructured its North American operations.
WMX said the Waste Management unit reported increased volumes in its commercial and industrial markets, resulting in part from price increases in some regions of the country. In addition, Waste Management was awarded new collection contracts in Boston, Oklahoma City and Gainesville, Fla., as well as a new disposal contract in Atlanta.
WMX stock closed up $1.12 Wednesday, at $28.87.
– Goldman Sachs downgraded Illinois Central after its announcement that it would acquire Kansas City Southern Industries’ rail operations. Goldman Sachs labeled Illinois Central a “moderate performer,” down from “moderate outperformer.”
Illinois Central fell $1.75, to $30.62.
– Arthur J. Gallagher announced a continuation of a stock buyback program in connection with its stock-option plans. Gallagher, an international insurance brokerage firm based in Itasca, will repurchase up to 975,000 shares through June 1995.
