Dow Plunges 53.76 to a Six-Month Low : Stock Mutual Funds Gain in 3rd Quarter

The typical stock mutual fund rebounded in the third quarter, erasing the losses suffered in the first half of the year, fund tracker Lipper Analytical Services reported Friday.

The average general stock fund gained 2.77% in the quarter ended Sept. 30 after falling 2.71% in the first six months. The typical fund now shows a return of only 0.04% so far this year.

The funds also lagged the benchmark Standard & Poor’s 500 stock index, which gained 3.15% in the third quarter and 2.46% in the first nine months.

The fund industry’s returns were pulled up in the quarter by a rebound in smaller stocks, which had been hit hardest earlier in the year. The average small-stock fund rose 3.23% for the quarter after falling 6.05% in the first half. For the year to date, small-stock funds are down 2.68% on average.

The biggest moneymakers in the quarter were funds that specialize in stocks of specific industries:

Utility stock funds jumped 4.94%, leading all categories of stock funds. Next were natural resources funds, up 3.93%. Both groups benefited from a rally in natural gas stocks, as gas prices rose. Technology stock funds rose 3.67%, as semiconductor and software stocks gained.

The quarter’s big losers: Latin American stock funds, down 11.13% on average, and European stock funds, which slumped 8.48%.

Coming Monday in Business: A full report on third-quarter stock fund results and the outlook.

Sinking Hopes for the Economy

The stock market selloff Friday was led by industrial issues that have the most to lose if the economy sinks into a new recession. Investors’ fears were compounded by a weak employment report and by the failure of the Federal Reserve to cut interest rates further, as expected. Some big movers: Stock: Fri. close and change Stanley Works: $34, -6 General Electric: 75 3/4, -2 1/8 Georgia-Pacific: 50 1/2, -2 Dow Chemical: 53 7/8, -1 7/8 Reynolds Metals: 49 3/4, -1 7/8 Caterpillar: 49 5/8, -1 3/4 PACCAR: 50 3/4, -1 3/4 IBM: 78 1/2, -1 5/8 Goodyear: 61, -1 1/2 Emerson Electric: 52 7/8, -1 1/2