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STOCKS KEEP FALLING AS INTEREST FEARS CONTINUE

Stocks turned mostly lower today as investors' worries about higher interest rates outweighed another round of strong corporate profit reports.

At 3 p.m., the Dow Jones industrial average was off 40.80 at 10,967.37. The Standard & Poor's 500 index was fell 3.29 to 1,398.62, and the Nasdaq composite index dropped 9.84 to 4,086.24.

Procter & Gamble rose 5 1/2 to 101 1/2 . The company's stock price, which tumbled last week as P&G held talks to acquire drug companies Warner-Lambert and American Home Products, began its recovery Monday after company officials called off the talks.

Today, P&G posted fiscal second-quarter earnings that beat analysts' expectations, providing further punch to the stock.

Walt Disney Co. jumped after the company surprised investors with higher profits in the company's most recent quarter.

"The bullish case for today is stellar profit growth going forward," said Francis Gannon, a portfolio manager with SunAmerica Asset Management Corp. "Disney's stock was upgraded by several analysts and you had very positive earnings. That's why it's up today." Disney climbed 4 3/4 to 37 1/4 .

Disney shares also benefited from a management reorganization that will elevate ABC network chief Robert Iger to second in command at Disney.

Analysts at Goldman Sachs, Merrill Lynch and Salomon Smith Barney, among others, raised their recommendations on Disney.

The Dow's technology companies were lower today, with IBM off 4 1/2 at 117 and Hewlett-Packard down 4 1/2 to 109 1/2 . Compaq, which reports earnings after exchanges close today, fell 1 to 32; and Dell dropped 3/4 to 40 1 3/1 6.

Motorcycle maker Harley-Davidson Inc. climbed 4 1/8 to 75 1/2 and Biogen, one of the world's largest biotechnology companies, soared 11 3/1 6 to 96 3/8 after being selected to replace Foster Wheeler Corp. and Fleetwood Enterprises Inc. in the S&P 500.

Foster Wheeler fell 1 1/8 to 8 1/1 6 and Fleetwood declined 1 5/1 6 to 18 3/8 .

Companies added to the S&P 500 typically gain because investors who run funds that try to match the index's performance have to buy shares in the companies. There's about $750 billion in funds that try to match S&P indexes, with the bulk of that tracking the S&P 500.

Tellabs fell 11 9/1 6 to 57 7/1 6 after the telecommunications-equipment maker warned earnings were likely to be less than analysts forecast. The shares touched 54 1/2 . Before today, they'd risen 65 percent in the past year.

Trading was fairly volatile as investors contemplated next week's Federal Reserve meeting. Central bankers are expected to raise interest rates a quarter-percentage point, but many economists fear that increase next week will be the first of several as the central bank works to hold off inflation.

Federal Reserve Chairman Alan Greenspan's testimony on the economy and the federal budget before the Senate Budget Committee was postponed today because of a snowstorm in Washington. No decision has been made on when it will be rescheduled.

A report on home sales was also postponed because federal government offices closed today, and will be released at 10 a.m. Wednesday.

Many market participants expected Greenspan would say "the time has come for more serious tightening" of monetary policy, said Bernard Walschots, head of financial markets at Rabobank in Utrecht, Netherlands.

Stocks plunged Monday as optimism about corporate earnings gave way to jitters about rising interest rates and their impact on profit growth.

Today, the Conference Board reported that consumer confidence soared in January to the highest level ever reached in the 32 years that the data has been compiled. The report suggested that consumer spending, the primary engine of the nation's economic growth, will continue to grow.

The report may add to the Fed's concern that the economy is growing too quickly, analysts said.

The Dow fell 243.54 Monday to close at 11,008.17, its steepest loss since Jan. 4, when it lost 359 points. The sell-off was broad-based, with 27 of 30 Dow component stocks finishing lower.

On Monday, Federal Reserve Bank of Atlanta President Jack Guynn acknowledged that last year's rate increases had little effect on economic growth.

"There is no broad-scale evidence to show that those three increases have done anything to dampen consumer demand," he said, although he noted that it takes several months to see the full impact of rate increases.

Guynn's comments unnerved investors a day before Fed Chairman Alan Greenspan's planned testimony before a Senate committee about the federal budget. While Greenspan is not expected to specifically address interest rates, Fed watchers will carefully monitor his comments for any signs of the central bank's course, analysts said.

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