Concern on rates, NAFTA hurts stocks 30-year bond yield closes at 6.15%

WALL STREET

November 16, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks closed lower yesterday amid concern about rising long-term interest rates and tomorrow's vote on the North American Free Trade Agreement.

Weakness in tobacco, semiconductor and paper shares -- some of last week's biggest winners -- also caused stocks to surrender part of Friday's advance, traders said.

"Anything that would cause the market to lose its interest-rate underpinning gets me concerned," said Robert von Pentz, chief investment officer of Riggs Investment Management Corp.

The Dow Jones industrial average fell 6.99, to 3,677.52. Declines in Goodyear Tire & Rubber Co., McDonald's Corp. and Philip Morris Cos. outweighed gains in Boeing Co., Coca-Cola Co. and DuPont Co.

Among broader market indexes, the Standard & Poor's 500 Index dropped 1.64, to 463.75, after rising 2.75 points on Friday. The Nasdaq Combined Composite Index, which rose 0.34 on Friday, slumped 6.87, to 772.45, yesterday, led by Intel Corp., Microsoft Corp., DSC Communications Corp. and Willamette Industries Inc.

The American Stock Exchange Market Value Index fell 1.78, to 477.82.

Five common stocks fell for every three that rose on the New York Stock Exchange. Trading was moderate, with about 251 million shares changing hands on the Big Board.

Stocks declined as investors overlooked additional positive reports about the economy to focus on the slump in Treasury bond prices. "There's some concern that interest rates may be heading higher because of good economic news," said Alan Ackerman, research director at Reich & Co.

The yield on the benchmark 30-year bond rose as high as 6.20 percent before closing at 6.15, from 6.14 percent late Friday, following larger-than-expected gains in business inventories and industrial production.

Rising interest rates hurt stocks because they constrain the economic recovery and make fixed-income securities more attractive investments than equities.

Yesterday's decline in stocks was led by oil, semiconductor and electric utility shares.

Meantime, investors were wary of taking big positions in stocks before the House of Representatives votes tomorrow night on the U.S. tradeagreement with Canada and Mexico, traders said.

"I think we'll get a rally if Clinton gets the votes," said Thomas Gallagher, chief trader at Oppenheimer & Co.

If NAFTA doesn't pass, "the stock market could come down substantially," said Richard Ciardullo, head trader at Eagle Asset Management, which oversees about $6 billion.

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