Decline in T-bond yield boosts stocks Dow up 20

WALL STREET

February 23, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks gained yesterday as the yield on the benchmark 30-year Treasury bond fell below 7 percent for the first time.

"Interest rates are so low money only has one place to go, and that's into the stock market," said John Blair, head trader at NatWest Securities.

The Dow Jones industrial average rallied 20.81, to 3,342.99, led by gains in J. P. Morgan & Co., which was added to Merrill Lynch's "buy" list. Standard & Poor's 500 Index rose 1.04, to 435.26, and the New York Stock Exchange Composite Index advanced 0.25, to 239.52. The American Stock Exchange Market Value Index fell 3.09, to 399.29.

The NASDAQ Combined Composite Index plunged 11.19, or 1.7 percent, to 652.42, the lowest close since Dec. 15.

The NASDAQ composite was hurt by slumping biotechnology stocks. Synergen Inc. lost 68 percent of its market value as the stock dropped $28.625 a share, to $13.50, after the company said results of human tests involving its sepsis drug Antril were poor.

"Biotech stocks were killed because of Synergen's announcement," said Edward Collins, head trader at Daiwa Securities (America). Amgen Inc. fell $3.50, to $41.50; Biogen Inc. declined $1.375, to $26.875; Regeneron Pharmaceutical slumped $2.25, to $11, and Immunex Inc. dropped $1.625, to $37.75.

On the NYSE, advancing common stocks outnumbered declining issues by a slim margin. Trading was active, with more than 325 million shares changing hands on the Big Board. The 30 components of the Dow Jones industrial average accounted for about 10.9 percent of the trading that occurred on the Big Board. That's below the average 11.3 percent this month.

U.S. stocks received a boost from the decline in Treasury bond yields. The yield on the benchmark 30-year bond fell 7 basis points, to 6.93 percent, amid tough talk from President Clinton about cutting the federal budget deficit. Mr. Clinton said yesterday that he won't support raising taxes unless government spending also is cut.

Last week, Mr. Clinton unveiled his plan to cut the deficit. Some analysts said higher taxes would hurt the economic recovery by stunting consumer spending, increasing corporate costs and causing corporate profits to decline.

"The more Clinton's plan is put under a microscope, the worse it gets," said Don Hays, investment strategist at Wheat First Butcher & Singer. "Proposed spending cuts are minimal when compared with all the tax increases."

Others analysts said the economic problems caused by raising taxesare offset by low interest rates. Investors typically move money into the stock market when bond yields are low because that's where investors are more likely to earn a better return on their investment.

"The stock market is going to twist and turn for the next several weeks as investors try to figure out how Clinton's plan is going to affect the economy," said Richard Meyer, head of institutional trading at Ladenburg, Thalmann & Co.

Health care stocks were battered again by concern over President Clinton's proposal to limit tax breaks for companies manufacturing in Puerto Rico, where many drug companies have operations, and by his attacks on drug makers' pricing policies.

U.S. Surgical Corp. plunged $4.375, to $57.125, after falling $6.125 points Friday. Medtronic Inc. fell $6.50, to $70.50, following Friday's $4.75 plunge. Medco Containment Services Inc. declined $2.25, to $28.75.

Tobacco stocks continued to weaken amid concern of higher taxes on cigarettes to help pay for health care reform. Also, skittishness about an ABC News program about the tobacco industry and smoking's health dangers that's due to air Thursday contributed to the decline.

Philip Morris Cos. fell $3.375, to $64.625, after falling $2.625 Friday; and RJR Nabisco Holdings Corp. declined 25 cents, to $8, after falling 12.5 cents Friday. UST Inc. slumped $2.75, to $26.25, and American Brands Inc. fell 62.5, cents to $33.875.

Synergen, Philip Morris, Amgen, RJR Nabisco and Medco Containment Services were the five most actively traded issues on the U.S. Composite.

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