Stocks falter as yields on U.S. bonds leap


January 08, 1993|By Bloomberg Business NewsNEW YORK

NEW YORK -- U.S. stocks tumbled in the final hour of trading yesterday, buffeted by computer-guided sell orders and surging government bond yields.

The decline erased big gains in over-the-counter stocks and sparked a retreat in blue-chip issues.

The Dow Jones industrial average closed 36.20 points lower, at 3,268.96. The index fell as low as 3,260.86, after rising as high as 3,313 at midday. Standard & Poor's 500 index plunged 3.79, to 430.73.

The high-flying NASDAQ Combined Composite slid 3.64, to 678.21.

Investors started dumping Standard & Poor's 500 stocks late in the day when the Dow industrials broke below 3,300, traders said. The decline accelerated when the Dow fell below 3,280, a perceived market bottom in chart watchers' view, said Abbe Cocuzza, strategist in stock-index futures at Lehman Bros.

"The reason why is we had a bad day in the bond market," said Mr. Cocuzza. "We had a pretty good back-up in rates." Rising yields tend to make bonds more attractive relative to stocks.

The corporate bond market was extremely active for a second straight day, with $4.2 billion in new bonds sold, as companies rushed to issue new debt to take advantage of the lowest interest rates in months.

Treasury prices also were pushed lower by a report showing a sharp decline in the number of people filing unemployment claims.

The yield on the benchmark 30-year bond leapt 12 basis points, to 7.45 percent, amid a flood of corporate bond sales and signs of an improving economy. The price of the Treasury's main 30-year bond, which lost 1/4 point on Wednesday, dropped 1 1/8 points, or about $11.25 per $1,000 in face amount.

Declining issues outpaced advancers by a margin of almost 2-to-1 on the New York Stock Exchange. Trading was unusually active, with 303.1 million shares changing hands on the Big Board.

The Dow Jones transportation average, countering the market's weakness, rose 12.49, to 480.23. Airline stocks, boosted by UAL Corp.'s plan to pare $400 million from its 1993 budget, led the rally. UAL was up $4.125, to $128.

After rising 0.72 percent this week to a record high of 681.85 on Wednesday, NASDAQ stocks were poised for a fall, said traders.

"The flood of money into high-technology stocks was faulty speculation," said Robert Stovall, president of Stovall/Twenty-first Advisers. "It was follow the leader. Intel's a great leader, but there's not that big in a change in the sales and earnings outlook of these other companies."

Stocks were mixed during most of yesterday's session as

NASDAQ issues continued to outpace the Dow industrials.

Electric utilities, beverages, food, international oil and health-care stocks fell the most in the S&P 500. Semiconductor, machinery, tobacco, airline and apparel stocks gained the most.

Intel Corp., Novell Inc., Philip Morris Cos., RJR Nabisco Inc. and Wal-Mart Stores Inc. were the five most actively traded stocks.

Intel closed up 87.5 cents, at $99.50, soaring as high as a historic peak of $103 yesterday, amid surging demand for its products and signs of strength in the U.S. semiconductor industry.

Novell ended unchanged, at $30.375, on news of an alliance with AT&T. Novell and American Telephone & Telegraph Co. plan to jointly develop and market a product to link business telephone systems with computer networks. The move, together with Novell's plans to buy AT&T's Unix Systems Laboratories, underscores Novell's dominant position in personal computer networking software.

AT&T fell 25 cents, to $51.75, following the company's agreement to buy 20 percent of Unitel Communications for $150 million (Canadian) to counter rival MCI Communication Corp.'s presence in Canada.

Philip Morris rose 62.5 cents, to $72.50. The stock began to rebound from a two-day slide that cut $4 billion from the company's market value. The plunge was triggered by new reports about smoking's health dangers, fears of possible cigarette tax hikes and waning sales of the company's flagship brand, Marlboro.

Caterpillar shares climbed 75 cents, to $56.50, on expectations that President-elect Bill Clinton's administration would spend more on construction, traders said.

Retail stocks turned in a mixed performance amid gains in industrysales for December.

Wal-Mart Stores Inc. fell 87.5 cents to $60.125. The retailer said December sales at shops open at least one full year rose 10 percent.

Limited Inc. slipped 75 cents, to $28.25. The retailer reported a 9 percent increase in December same-store sales.

The Associated Press contributed to this article.

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