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Stocks Mixed as Wall Street Copes With Warnings on Earnings

September 19, 1995

NEW YORK (AP) _ Wall Street overcame significant weakness Tuesday in turning in a mostly positive performance as investors confronted warnings about corporate profits and coped with economic uncertainty.

Blue chips struggled against a selling tide because Dow Jones industrials-component Caterpillar got clobbered after releasing a gloomy preview of its third-quarter results.

But after being down by nearly 50 points, the 30-stock index closed with a comparatively minor loss of 13.37 at 4,767.04.

The broader market fared far better than the Dow, with new highs reached by Standard & Poor’s 500 and the New York Stock Exchange composite index. The NYSE logged a gain of 0.55 to 313.11, exceeding the prior record of 313.00 set on Friday. The S&P 500 rose 1.43 to 584.20, up from the peak of 583.61 notched Thursday.

Advances managed to nose past declines on the Big Board after running behind for most of the day.

Volume on the NYSE floor expanded to 371.04 million shares. That was up from 326.07 million shares as of 4 p.m. Eastern time on Monday.

Credit for the market’s resilience went to the technology sector, which showed signs of reasserting its leadership role in earnest, handing the Nasdaq Stock Market a solid gain. Its composite rose 10.13 to 1,060.31.

Heavy selling in Caterpillar set a negative course for blue chips, causing investors to bail out of cyclical stocks in general, fearing that mediocre economic growth would impair their profit prospects.

If not for Caterpillar’s 6 3/8 tumble to 59, the Dow industrial average would have managed an increase of about five points. Investors dumped Caterpillar in response to news from the company late Monday that its third-quarter earnings will be lower than last year’s.

The selling was offset by a rally in technology stocks, which were buoyed by upbeat sentiment emanating from conference sponsored by Montgomery Securities in San Francisco.

Gainers among the tech stocks included International Business Machines, which spurted 2 5/8 to 96 3/4, and Texas Instruments, which jumped 4 1/2 to 82 1/4.

Bill Allyn, director of listed equity trading at Jefferies & Co., said ``Caterpillar was responsible for very ugly readings for awhile in the popular indexes. But technology stocks rescued the market.″

Investors looking for guidance on the economy reviewed a new government report depicting a modest pickup in the important housing industry that analysts said signaled the beginning of an expected plateau.

Construction of new homes rose in August for the fifth straight month, but the slight 0.6 percent increase was the smallest since the housing industry began its rebound from a winter slump.

The news comforted bond traders who are holding out hope that poor economic vital signs will induce the Federal Reserve to reduce interest rates. The central bank’s policy arm meets next week and many observers assume the Federal Open Market Committee will keep rates at current levels for now.

Strength in bond prices was a plus for equities. The main 30-year Treasury bond was up about 5/8 point in late trading, which nudged down its yield to 6.48 percent from 6.52 percent late Monday.

Gains overseas provided a favorable background for Wall Street. Stocks rebounded in Tokyo where the 225-share Nikkei Stock Average gained 155.22 points, up 0.85 percent, closing at 18,474.38. On Monday, the key index had fallen 439.39 points.

European markets also moved ahead. In London, the benchmark Financial Times-Stock Exchange 100-share index finished up 8.1 points, or 0.23 percent, at 3,541.4. Market indicators in Frankfurt and Paris also ended ahead.

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