Interest-rate fears hit stocks Dow off 21


March 27, 1993|By Bloomberg Business News

NEW YORK — ...TC NEW YORK -- U.S. stocks slumped yesterday as concern about rising interest rates outweighed evidence of a stronger economy and corporate profits.

"We've seen the low in interest rates, and that makes the market a lot more vulnerable," said John Conlon, managing director at Rothschilds Inc.

The Dow Jones industrial average dropped 21.34 points, to close at 3439.98, largely because of a wave of computer-driven sell orders during the last hour of trading. Merck & Co., Coca-Cola Co., Texaco Inc. and International Paper Co. were among the weakest stocks in the average. For the week, the Dow industrials fell 31.60 points.

New York Stock Exchange trading was moderate, as 226 million shares changed hands.

Declining issues led advancers 8-to-7 on the Big Board, while advancers topped decliners on the Nasdaq by a 5-to-4 margin.

"People are looking for a place to put their money and they are finding it in secondary stocks," said James Andrews, first vice president in charge of institutional trading at Janney Montgomery Scott in Philadelphia.

The Nasdaq Composite Index closed 0.53 higher, at 681.54. The Standard & Poor's 500 index fell 3.11, at 447.77, and the American Stock Exchange Market Value Index dropped 0.35, at 419.47.

Bond prices tumbled in the wake of a report in the Wall Street Journal that the Federal Reserve didn't change interest rates this week, indicating the economic recovery is on firm ground. The 30-year U.S. Treasury bond fell 1 3/32, to yield 6.94 percent, up nine basis points, or 0.09 percentage point.

Long-term rates "have seen their lows," said Rao Chalasani, chief investment strategist at Kemper Securities in Chicago. "That's obviously a disappointment" for the stock market, he said.

Yesterday morning's report on fourth-quarter corporate profits indicated that earnings were improving, analysts said. The Commerce Department said after-tax profits advanced 9.2 percent in the quarter, to $242.6 billion, the largest increase since the 1992 first quarter. For all of 1992, profits rose 10 percent, the largest gain since 1988.

"We're seeing the payoff from five years of corporate restructurings," said Hugh Johnson, chief investment strategist at First Albany Corp.

Also, the department reported that the final revision of gross domestic product figures showed the economy expanded at a 4.7 percent rate in the fourth quarter, the fastest pace in five years. The results were in line with economists' estimates.

Drug, beverage and communications equipment stocks were the weakest performers among Standard & Poor's industry groups.

Reuters Holding PLC, Bankers Life Holding Corp., Merck, Northern Telecom Ltd. and RJR Nabisco Holdings Corp. topped the list of most actively traded issues.

Bankers Life, an insurance company, sold its initial public offering of 17 million shares yesterday at $22. The stock closed at $24.50, up $2.50.

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