Uncertainty on NAFTA Drags Stocks Down : Market Overview

U.S. stock prices eased in moderate trading Monday, hurt by weakness in utility, energy and tech issues and by concerns over the congressional vote on the North American Free Trade Agreement, due Wednesday.

* Bond yields were mostly unchanged, despite new evidence of economic strength. Gold edged up, as did the dollar.

Stocks

Many big investors appeared to be in a holding pattern, awaiting the outcome of the NAFTA voting, traders said.

The Dow industrials traded in a narrow range Monday and closed 6.99 points off at 3,677.52. Volume shrank to 251 million shares on the New York Stock Exchange, where losers outnumbered winners 12 to 8.

Analysts said optimism about NAFTA’s chances, which drove stocks up last week, was petering out.

The White House claimed Monday to have lined up 15 more votes for the treaty in the House of Representatives, but those publicly committed to voting “no” still outnumbered those in favor of the treaty.

Nervousness over the continuing decline in electric utility stocks also weighed on the market, as did a new round of profit taking on energy and tech issues.

Still, traders noted that the market has been amazingly resilient, despite recent setbacks.

Among Monday’s highlights:

* Utility stocks took another significant hit. They have plunged since September, as investors have focused on the potential for rising interest rates in an improving economy.

The Dow utility index fell 2.50 points, or 1%, to 222.45. Among individual issues, American Electric Power lost 1/2 to 35 1/4, Consolidated Edison dropped 3/4 to 31 and Southern Co. eased 1/8 to 42 1/2.

* Energy stocks fell sharply on new pessimism about OPEC’s ability to stem the decline in oil prices. Mobil lost 1 1/8 to 75 7/8, Arco tumbled 1 5/8 to 107 3/4, Phillips dropped 1 5/8 to 29 1/2, Pennzoil eased 1 to 56 3/4 and Williams Cos. sank 1 1/8 to 26 5/8.

* Tech stocks weakened as the computer industry opened its biggest annual trade show in Las Vegas. Intel lost 2 3/4 to 60, Compaq fell 1 5/8 to 66 7/8, Dell tumbled 1 3/8 to 24 7/8, Pairgain sank 1 1/2 to 13 1/2 and Sybase lost 1 1/2 to 70.

* On the plus side, many retail stocks continued to advance on optimism about consumer spending. J.C. Penney rose 1 to 52 1/2, Dayton Hudson gained 7/8 to 72 3/8, Home Depot surged 1 3/8 to 44 1/4 and Federated Department Stores added 5/8 to 21 7/8. But Toys R Us sank 2 1/4 to 40 5/8 in profit taking.

* Shares of TV network companies rose following a court decision that allows them to own a financial interest in TV programs produced by others--a right the companies have long sought. CBS rose 8 1/4 to 303 1/8; Capital Cities/ABC jumped 11 5/8 to 630 3/4, and General Electric, parent of NBC, added 3/8 to 94 1/4.

In foreign markets, Mexico City’s Bolsa index hit a new high, showing optimism about the NAFTA vote in the U.S. Congress. The Bolsa rose 14.89 points to a record 2,123.33.

In Tokyo, the Nikkei-225 index suffered another steep drop. It fell 418.94 points, or 2.3%, to 18,074.61, as investors continued to lose faith in the Japanese economy’s ability to rebound soon.

In London, the FTSE-100 index eased 5.8 points to 3,093.3. But in Frankfurt, the DAX index surged 34.10 points to 2,049.11 on renewed expectations of interest rate cuts.

Other Markets

Bond yields closed mostly flat with Friday’s levels, as NAFTA concerns that sidelined many stock investors also sidelined some bond investors. The yield on the Treasury’s 30-year bond was unchanged at 6.15%.

Some traders said they were surprised the market held up so well, given the report Monday of a surge in industrial production in October. Recent signs of economic strength have raised fears that interest rates have hit bottom.

Analysts also worried that, however the NAFTA vote goes, it could be negative for bonds. A defeat could weaken President Clinton’s political power and jeopardize his long-term plan for federal deficit reduction. A victory, on the other hand, could spark new expectations of faster economic growth and drive up interest rates.

In other news:

* Gold’s advance resumed. On the Comex, near-term futures rose $2.10 an ounce to $375.20. Silver closed at $4.55 an ounce, up 4.3 cents.

* On the New York Merc, light, sweet crude oil for December inched up 4 cents to $16.76 a barrel.

* Cocoa prices soared to two-year highs as traders worried about a shortage compounded by quality, disease and weather problems in the three largest cocoa-producing countries. March cocoa futures rallied $61 to $1,252 a metric ton.

* The dollar gained, helped by the latest economic data. The dollar closed at 106.73 Japanese yen in New York, up from 105.60 on Friday. It closed at 1.692 German marks, up from 1.685.

Market Roundup, D18