Dow Tumbles 46 Points on Profit Worries; Yields Rise

Stocks were mixed Tuesday as a day of big economic news played out according to script, but failed to inspire investors worried about company profits for the just-ended third quarter.

The Dow Jones industrial average took another brief journey above the 8,000 mark, but wound up falling 46.17 points to 7,945.26 by the close despite rebounding from an early 54-point loss.

Smaller-company shares pushed some measures further into record territory. But several broad-market indexes trailed lower with the Dow after the Federal Reserve Board, as expected, decided not to combat inflationary pressures by slowing the economy with a boost in the central bank’s lending rates.

Similarly, a series of economic reports released Tuesday revealed no surprises that would undermine the outlook for steady economic growth with low inflation and interest rates.

The Commerce Department said new-home sales fell 2.2% in August, a drop that was somewhat larger than expected. And in the earliest taste of how the economy behaved in September, a Chicago manufacturing group reported that factory activity increased at a slower pace in the Midwest.

The Conference Board, however, reported that consumer confidence edged higher in September, suggesting continued demand pressures that could push factory wages--and retail prices--higher.

“Everything is still on track for that middle-of-the-road economy,” said Barbara Marcin, senior equity portfolio manager at Citibank Global Asset Management. “Most of [Tuesday’s] trading may have been moved by quarter-end window dressing, with people kicking out things they don’t want to show in the portfolio.”

U.S. bonds fell for a second day as traders looked past the Fed’s decision on interest rates and focused on Friday’s impending report on September unemployment and wages data.

The price of the U.S. 30-year Treasury bond fell, raising the yield to 6.39% from 6.38% Monday.

Meanwhile, the U.S. Treasury said it plans to sell $15 billion in bills next Monday at its weekly auction. The three-month and six-month bills would raise $100 million in new cash. Maturing securities total $14.892 billion.

In the broader stock market, advancing stocks outnumbered gains about 9-7 on the New York Stock Exchange in heavy trading.

The Standard & Poor’s 500-stock list fell 6.06 points to 947.28, the NYSE composite index fell 1.75 points to 497.23 after flirting with a new high, and the technology-heavy Nasdaq composite index fell 9.29 to 1,685.69, following a near-record close Monday.

The Russell 2000 index of smaller companies rose 2.51 points to 453.82 for its second consecutive record close.

Among Tuesday’s highlights:

* The Dow took its cue from disappointing technology news. Ascend Communication, off $2.88 to $32.38, and Western Digital, down $1 to $40, warned late Monday of weak earnings in the current quarter.

“That brought the whole sector down and the broad market with it,” said Phil Orlando, chief investment officer of Value Line’s Asset Management division.

Western Digital’s loss prompted a slide by rival Quantum, which fell $4.13 to $38.31.

And Intel slumped $3.06 to $92.31 after Merrill Lynch said the chip maker’s third-quarter earnings won’t meet its estimate of 92 cents a share.

Semiconductor maker Zilog tumbled $2.81 to $21.81 after the company said it expects weaker-than-expected earnings.

* ITT rallied $5.25 to $67.75 after a federal judge ruled that the company needs shareholder consent to break into three companies, giving new life to Hilton Hotels’ hostile $70-a-share takeover bid. Hilton rose $1.56 to $33.69.

* Gold companies gained as the precious metal’s price jumped $6.20 an ounce to a 13-week high of $334.30 an ounce. Barrick Gold rose 75 cents to $24.69, Placer Dome climbed 75 cents to $19.13, Newmont Mining climbed 44 cents to $44.94 and Battle Mountain Gold rose 75 cents to $7.19.

Overseas, Tokyo’s Nikkei stock average fell 0.6%, Frankfurt’s DAX index rose 1.5% and London’s FTSE-100 rose 0.8% to a new high.

* Market Roundup, D9