Uncertainty on NAFTA Drags Stocks Down : Market Overview

Stocks were dragged down Monday by uncertainty over Wednesday’s congressional vote on the North American Free Trade Agreement.

* Long-term interest rates closed unchanged in light, cautious trading ahead of the vote on the trade agreement.

* The dollar and gold closed higher.

Stocks

The White House claimed Monday to have gathered 15 more “yes” votes for NAFTA in the U.S. House. However, those publicly committed to voting “no” still outnumbered those in favor of the pact to eliminate most trade duties on the continent.

Analysts said optimism over NAFTA’s chances, which helped drive stocks up last week, is petering out.

The Dow Jones industrial average closed down 6.99 at 3,677.52 on Big Board volume of 251.03 million shares, down from Friday’s 326.24 million share. Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange. “The market seems to be on hold at the moment with lots of folks sitting around waiting for NAFTA. There certainly was a paucity of buyers out there,” said A. Marshall Acuff, market strategist at Smith Barney Shearson.

Illustrating NAFTA jitters, Telefonos de Mexico, the big Mexican telephone company, gave up some of its gains of last week, losing 1 1/4 to 54 3/8 on the New York Stock Exchange.

A positive economic report from the Federal Reserve sent long-term interest rates higher early in the day, putting a downward influence on stocks as well.

Among the market highlights:

* Technology stocks continued weak with Intel among the biggest losers, down 2 3/4 to 60.

* Tobacco shares gave back recent gains made on news last week of cigarette price increases. Philip Morris fell 1 to 58 and was downgraded to hold from buy by A.G. Edwards. American Brands slipped 3/8 to 35 while RJR Nabisco dropped 3/8 to 6 7/8.

* Midisoft rose 1 3/4 to 13 after the Redmond, Wash.-based software company’s chief executive made bullish comments about its outlook on a local television program.

* Laboratory instrument maker Hach Co. fell 2 1/4 to 18 1/2 after a merger agreement broke with Lawter International, which rose 1/8 to 14.

* Shares of television network stocks rose following a court decision that allows them to own a financial interest in television programs produced by others, and gives them the right to make profits from syndication of programs. CBS was up 8 1/4 to 303 1/8; ABC-Capital Cities gained 11 5/8 to 630 3/4. General Electric, owner of NBC, was up 3/8 to 94 1/4.

Stocks were mixed in overseas trading. In Tokyo, the Nikkei average plunged 418.94 points, or 2.27%, to 18,074.61, while London’s Financial Times 100-share average lost 5.8 points to close at 3,093.3. Frankfurt’s 30-share DAX average was up 34.10 points at 2,049.11.

Other Markets

After shrugging off the bearish economic data earlier, the yield on the Treasury’s main 30-year bond finished unchanged at 6.15%. Its price slipped 3/32 point, or 94 cents per $1,000.

“The uncertainty over NAFTA seemed to be negative for the market today because it would mean a loss of confidence in the Clinton Administration,” said Kathleen Camilli, chief economist at Maria Fiorini Ramirez Inc.

One of the big reasons the bond market has rallied strongly this year is Clinton’s pledge to slash the federal budget deficit, which would tend to help the value of bonds. The market is worried that a NAFTA defeat would bruise Clinton’s political ability to push through market-friendly programs.

The gain in the Fed’s industrial production index came on top of a 0.4% rise in September. It was the fifth consecutive monthly advance.

In another report, the Commerce Department said business sales rose 0.8% in September, far outpacing a moderate 0.3% increase in inventories. That’s considered a positive sign for future factory production.

That translates to a stronger economy and a possible acceleration of inflation, which tends to hurt bond prices.

The federal funds rate, the interest on overnight loans between banks, was 3.25%, up from 3.063% late Friday.

Elsewhere:

* The dollar rose in New York as traders bought the U.S. currency to cover short positions.

* Gold rose on the New York Comex to $375.20 an ounce, up $2.10 from Friday. Silver closed at $4.550 an ounce, up 4.3 cents from Friday.

* In energy trading on the New York Merc, light sweet crude oil for December delivery rose 4 cents to $16.76 a barrel.

Market Roundup, D10