Stocks mixed as bonds falter Dow off 2


February 11, 1993|By Bloomberg Business News

NEW YORK -- Stocks closed mixed yesterday amid concern that the monthlong rally in Treasury bonds has ended.

"The bond market's running out of gas, and that's sending a warning signal to the stock market," said Don Hays, investment strategist at Wheat First Butcher & Singer.

The Dow Jones industrial average fell for the third straight day, losing 2.16 points, to 3,412.42. The decline in the Dow was led by Eastman Kodak, which fell $1.75, to $52, after the stock was removed from the "buy" list at Dean Witter Reynolds.

The Dow reached a session low of 3,394.86 after the Treasury Department said the $10.75 billion auction of 10-year notes had drawn an average yield of 6.33 percent, indicating that demand was weaker than expected for the second leg of the quarterly refunding.

The benchmark 30-year bond fell about 3/4 point as the auction results were announced, with the yield rising 5 basis points, to 7.25 percent, the highest level since Jan. 26. The $35.5 billion Treasury auction began Tuesday with the sale of $15.5 billion of three-year notes and will end today, with the sale of $9.75 billion of 30-year bonds.

"If the 30-year auction is disappointing, interest rates are going to go higher," said Hugh Johnson, investment strategist at First Albany Corp. "As interest rates move higher, investors' appetite for stocks declines, and the outlook for corporate earnings darkens."

The Standard & Poor's 500 index advanced 0.89, to 446.22; the New York Stock Exchange Composite index gained 0.39, to 245.93; and the American Stock Exchange Market Value index rose 1.10, to 416.10. The NASDAQ Combined Composite index ended its three-day slide by rising 2.81, to 695.02.

Advancing stocks outnumbered declining issues on the New York Stock Exchange by a narrow margin. Trading was active, with about 251 million shares changing hands.

Overall, the stock market is struggling as investors await President Clinton's State of the Union address next week. "We're in a waiting mode as the market tries to prepare for what the new administration has to offer," said Peter Canelo, investment strategist at NatWest Securities.

"Nervousness about the Treasury market and how President Clinton plans to lower the budget deficit are going to keep a lid on stocks for a while," said Edward Collins, head trader at Daiwa Securities America.

Semiconductor and cable stocks rallied yesterday. Shares of semiconductor makers surged after the industry reported that demand for its products soared in January.

Stocks of cable TV companies rose on speculation that Southwestern Bell's agreement to buy two cable systems from Hauser Communications would prompt more investments in )R cable operators by phone companies. Tele-Communications rose 87.5 cents, to $25, and Comcast Corp. special Class A stock climbed $1.375, to $21.125.

General Motors gained 87.5 cents, to $49.75, after NBC News settled a lawsuit over its depiction of a crash involving a GM pickup truck on NBC's "Dateline" program by agreeing to pay GM for the cost of the automaker's investigation.

GM asserted that NBC rigged the crash tests to support its contention that the fuel tanks on GM's 1983-1987 full-sized pickups are prone to rupture and may cause post-collision fires.

International Business Machines fell $1.25, to $52.125. A PaineWebber analyst said IBM needs more cost-cutting to boost its declining profits in mainframe computers.

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