Dow falls 17.29 as Treasury yields rise

WALL STREET

January 09, 1993|By Bloomberg Business News

NEW YORK -- Stocks slumped yesterday for a second straight day amid concerns about a spurt in Treasury bond yields.

"The trigger to the stock market's problems was the sudden rise in Treasury yields," said James Solloway, a director at Argus Research.

The Dow Jones industrial average fell 17.29, to 3,251.67, finishing the week with a decline of 49.44 points. Yesterday's slide was led by shares of Exxon and Procter & Gamble. The stock market's problems were not confined to blue-chip issues. The NASDAQ index of smaller stocks slid 0.99, to 677.22.

The Standard & Poor's 500 index declined 1.69, to 429.04, and the New York Stock Exchange Composite index dropped 1.05, to 236.21. Declining stocks outnumbered advancing issues by about 2-to-1. Trading was active, with 266 million shares changing hands.

The yield on the 30-year bond has risen 11 basis points in the past two days, to 7.46 percent. The rise in interest rates stems from concern that President-elect Bill Clinton will act to stimulate the economy. Rising interest rates make returns on fixed-income investments more attractive, a situation that tends to pull investors away from stocks.

The concerns about Mr. Clinton followed the Labor Department's report that the economy added 64,000 nonfarm jobs in December. Economists had been estimating that 90,000 jobs were created last month.

The "employment figures were a little disappointing," said Alfred Goldman, analyst at A.G. Edwards & Sons. "There's concern Clinton will stimulate more than we thought."

"The stock market has moved ahead of the economic realities," Mr.Solloway said. "The recovery is nothing spectacular."

Mr. Solloway said that stocks, especially NASDAQ issues, had been rising as if corporate earnings were rebounding at a robust clip. "It isn't the case," he said.

The decline in stocks is a "normal reaction to a very strong rally that we've had," Mr. Solloway said. The rise in Treasury yields, Mr. Solloway said, caused investors to focus on peripheral troubles, such as rising tensions in the Middle East and the former Yugoslavia, and concerns about the economy and earnings.

"Clinton's honeymoon is coming to an end," said Jack Solomon, market analyst at Bear Stearns. Investors are questioning the wisdom of some of Mr. Clinton's Cabinet choices, Mr. Solomon said, and wondering whether he will renege on his promise to lower the federal deficit.

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