Dow Takes 15.99 Fall Over Interest Rate Uncertainty
Stock prices fell today amid uncertainty over the outlook for interest rates.
The Dow Jones average of 30 industrials, which had risen 39.41 points over the previous three sessions, dropped 15.99 to 2,727.70.
Declining issues outnumbered advances by about 3 to 2 on the New York Stock Exchange, with 576 up, 858 down and 511 unchanged.
Big Board volume totaled 132.19 million shares, against 142.30 million in the previous session.
The NYSE’s composite index lost .60 to 187.17.
Interest rates rose in the market for U.S. Treasury bonds today.
Prices of the longest-term bonds dropped more than $10 for each $1,000 in face value, putting their yields in the 8.59%-8.63% range.
Analysts said the activity in bonds continued to reflect worries that an apparently budding revival in economic growth might tend to push rates higher in the months ahead.
The latest figures from the Commerce Department, issued on Wednesday, showed a slightly stronger pace of business activity during the fourth quarter of last year than had been previously estimated.
Bond prices fell, with long-term issues posting the largest losses as traders took profits early today.
The Treasury’s closely watched 30-year bond, which rose 1/32 point on Wednesday, was off 29/32 point, or about $9 for every $1,000 in face value at midday. Its yield, which rises when prices fall, was 8.55%, up from 8.46% late Wednesday.
Analysts attributed the decline to technical factors, particularly profit-taking.
Activity was moderate as traders digested the latest economic data released from the Commerce Department.
The government reported personal income rose 0.9% in February, its biggest gain in three months but in line with market expectations. In addition, consumer spending advanced a larger-than-expected 0.4%, although the gain was held in check by a decline in durable goods.
Consumer spending is watched closely as a barometer of economic health since it accounts for about two-thirds of the nation’s economic activity.
“The data mean the economy has room to expand,” said Elizabeth Reiners, a vice president at Dean Witter Reynolds Inc.
“People are still receiving increases in their level of income and they’re still willing to use that money to consume,” Reiners said. “That suggests that . . . manufacturers will continue to produce.”
Reiners noted that an increase in production would not support any easing of interest rates by the Federal Reserve, which loosens credit to encourage economic expansion. Higher interest rates correspond with lower prices for bonds.
In the secondary market for existing Treasury securities, prices of short-term government issues were off 3/32 point to 3/16 point, intermediate maturities were unchanged, and long-term issues fell 1/2 point to 3/4 point, according to figures provided by Telerate Inc., a financial information service.
