Stocks skid amid concern over rising T-bond yields


February 10, 1993|By Bloomberg Business News

NEW YORK -- Concern about rising Treasury bond yields and President Clinton's impending economic package drove stock prices lower yesterday for a second straight day.

The stock market also slumped,traders said, because investors booked profits in the shares that have rallied the most in recent sessions. "I see cash being raised here," said Richard Ciardullo, director of trading at Eagle Asset Management.

After dropping 4.6 points Monday, the Dow Jones industrial average tumbled 22.96, to 3414.58, led by Goodyear Tire & Rubber, International Paper Co. and Aluminum Co. of America. Yesterday's decline marked the fourth drop in the index over the past 12 sessions.

Broader market averages also fell yesterday. The Standard & Poor's 500 index fell 2.52, to 445.33, and the NASDAQ Combined Composite index lost 6.21, to 692.23.

Declining common stocks topped advancers by a margin of 11-to-5 on the New York Stock Exchange.

Trading continued to slow from the furious pace of the past few weeks, with more than 235 million shares changing hands on the BigBoard. The NYSE volume of about 240 million shares was well below last week's daily average of about 300 million shares.

"Everybody's waiting until the president's economic address next week," said Mr. Ciardullo. Mr. Clinton is scheduled to present his economic plan to Congress on Feb. 17. The administration is leaning toward increasing the top corporate tax rate to 36 percent from 34 percent, the Wall Street Journal said.

Meantime, investors remain concerned that Treasury bonds have become expensive after a three-week rally and that demand would be light at this week's Treasury auction, traders said. The worry, they said, was that a rise in Treasury yields might lure more money out of stocks.

Yesterday's auction results had little effect on Treasury bonds. The Treasury said the $15.5 billion sale of three-year notes drew an average yield of 4.73 percent, in line with analysts' expectations.

Yields later rose after Johnson Redbook Service reported a 3.7 percent increase in early February retail sales. The yield on the 30-year Treasury bond was hovering at about 7.2 percent, above its July 1986 low of 7.17 percent.

The note auction represented the first part of the Treasury's $35.5 billion sale of notes and bonds, known as the quarterly refunding. The Treasury will auction $10.75 billion in 10-year notes today and $9.25 billion in 30-year bonds tomorrow.

The stock market is losing momentum after rising for almost two straight weeks, said Richard Meyer, head of institutional trading at Ladenburg, Thalmann & Co. In addition, Mr. Meyer said, "people are starting to wonder whether President Clinton is going to follow through on any of his campaign promises."

Tobacco, autos, international oil, and beverage shares fell the most in the S & P 500, offsetting gains in semiconductors, drugs, computer systems and health care issues.

System Software Associates Inc., Costco Wholesale Corp., Intel Corp., Wang Laboratories Class B stock, and Amgen Inc. were the five most actively traded issues.

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