Dow Loses 3.04 in Response to Mixed Signals
Stock prices declined slightly today in a wary response to conflicting signals about the economic outlook.
The Dow Jones average of 30 industrials slipped 3.04 to 2,263.21.
Declining issues outnumbered advances by nearly 4 to 3 on the New York Stock Exchange, with 593 up, 782 down and 560 unchanged.
Big Board volume totaled 146.57 million shares, against 142.01 million in the previous session.
The NYSE’s composite index fell .39 to 163.41.
The Commerce Department’s report that new factory orders for durable goods dropped 3.6% in February surprised analysts, who had expected an increase.
The news was interpreted as a fresh signal that the economy is beginning to lose the momentum that has created upward pressure on inflation and interest rates in recent months. Interest rates declined modestly in the credit markets today.
Analysts said, however, that many traders remain unconvinced that inflation is ready to abate after back-to-back increases of a full percentage point in the producer price index of finished goods in January and February.
Also, some investors apparently are beginning to worry about the implications of slower growth for corporate profits.
Bonds Head Higher
Bond prices headed higher and short-term interest rates eased in quiet early trading today after release of the government report on February factory orders.
The Treasury’s bellwether 30-year bond gained about 3/8 point, or $3.75 per $1,000 face value, by midday, after rising by that amount in Tuesday’s session.
Its yield, which moves inversely to its price, fell to 9.24% from 9.28%.
Kevin Flanagan, a money market economist for Dean Witter Reynolds Inc., said the data boosted the credit markets by easing concerns about higher inflation, which have been responsible for driving up interest rates in recent months.
“Some people feel that perhaps the economy might be slowing a little bit,” Flanagan said. “I don’t necessarily agree with that.”
In the secondary market for Treasury bonds, prices of short-term governments rose between 1/8 point and 3/16 point and intermediate and long-term maturities rose between 1/4 point and 3/8 point, according to the Telerate Inc. financial information service.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on outstanding Treasury issues with maturities of a year or longer, rose 2.37 to 1,112.42.
In corporate trading, industrials were up. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.12 to 295.32.
Yields on three-month Treasury bills declined to 9.34% as the discount fell 8 basis points to 9.01%. Yields on six-month bills declined to 9.56% as the discount fell 7 basis points to 9.01%. Yields on one-year bills fell to 9.72% as the discount fell 7 basis points to 8.95%.
A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.
The federal funds rate, the interest on overnight loans between banks, traded at 9 13/16%, up from 9 3/4% late Tuesday.