Treasury auction weighs stocks down

February 09, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks fell yesterday on concern this week's Treasury sale of $35.5 billion in new debt might lead to higher bond yields.

"The stock market is keeping a wary eye on the bond market to see how the Treasury auction goes," said Jon Groveman, president of Ladenburg, Thalmann & Co.

The Dow industrials fell for only the third time in the past 12 sessions. The index declined 4.60, to 3437.54, led by declines in Goodyear Tire & Rubber Co. and United Technologies Corp.

The U.S. Treasury begins its quarterly auction today when it sells $15.5 billion of three-year notes. Investors are concerned that bonds have become too expensive after a three-week rally and that demand would be light for the new debt. If demand is light, Treasury bond yields would rise, putting pressure on the stock market as investors might move money out of the stock market and into higher-yielding fixed-income instruments, traders said.

The NASDAQ Combined Composite index, a weighted average of 4,000 stocks, fell for a second straight session. The NASDAQ composite declined 3.13, to 697.85.

bTC "Stocks like Microsoft are getting hit, and since they carry so much weight on the NASDAQ, the whole index is down," said John Blair, head trader at NatWest Securities.

Standard & Poor's 500 index slid 1.08, to 447.85; the New York Stock Exchange Composite index declined 0.53, to 247.07, and the American Stock Exchange Market Value index rose 0.58, to 417.16.

Declining common stocks outnumbered advancing issues by about 8-to-7 on the NYSE. Trading was less active than recent sessions, with about 241 million shares changing hands on the Big Board.

Treasury bond yields rose as bond underwriters pushed rates higher ahead of the quarterly refunding. The yield on the benchmark 30-year bond was at 7.19 percent, up 3 basis points after falling Friday to the lowest level in more than six years.

The Dow industrials and the NASDAQ composite were considered likely to go separate ways over the next several weeks, with the Dow industrials gaining ground while the NASDAQ falters, fund managers said.

Until last week, the Dow industrials lagged the NASDAQ composite as the Dow industrials were stung by negative reports from such leading companies as International Business Machines Corp., American Express Co. and General Motors Corp.

Meanwhile, the NASDAQ composite surged 23 percent from Oct. 5 to Jan. 29. In the same period, the Dow industrials gained 4 percent.

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