Dow Off 32.89 Despite Bullish Trade Report

The stock market posted a broad loss today, registering little enthusiasm over the latest news on the nation’s international trade balance.

The Dow Jones industrial average closed down 32.89 at 2,732.88 on moderately heavy volume of 150 million shares on the New York Stock Exchange.

In the broader market, declining stocks led advances by a 2-1 margin.

The Commerce Department reported that the U.S. trade deficit in February shrank to its narrowest reading in more than six years. Imports exceeded exports by $6.49 billion, down from $9.32 billion in January.

Analysts said that held out the prospect of stronger-than-expected growth in economic output, and improved profits at many companies with a substantial international business.

At the same time, however, the figures touched off fresh worries about the outlook for interest rates.

In the credit markets prices of long-term government bonds fell more than $10 for each $1,000 in face value, increasing their yields to the 8.84 percent-8.90 percent range.

Traders said the market was driven down by reports from Tokyo that Japanese institutional investors were selling as much as $6 billion in U.S. government securities. The Japanese are big holders of U.S. bonds.

Market watchers said the February trade data put out today further fueled concerns that the economy is strengthening and that interest rates are heading higher.

The Commerce Department said the trade gap eased from a revised $9.32 billion in January to $6.49 billion in February--the lowest monthly trade imbalance since December, 1983.

“The bottom line is that this (trade data) will add to the growth of first quarter gross national product, which is a negative for the bond market,” said Kevin Flanagan, a money market economist with Dean Witter Reynolds Inc.

The combination of high inflation and an improved economy could prompt the Federal Reserve to raise interest rates, which would depress bond prices, he said.

In the secondary market for Treasury bonds, prices of short-term governments fell about 1/16 point, intermediate maturities lost between 5/32 point and 1/4 point and long-term issues were off around 1/2 point, according to Telerate Inc., the financial information service.

The Shearson Lehman Hutton Daily Treasury Bond Index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 2.44 to 1,141.65.

Yields on three-month Treasury bills stood at 8% as the discount gained 1 basis point to 7.75%. Yields on six-month bills rose to 8.21% as the discount gained 1 basis point to 7.79%. Yields on one-year bills increased to 8.38% as the discount climbed 3 basis points to 7.80%.

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 rate banks charge each other on overnight loans, was quoted at midday at 8 7/16%, up from 8 3/8 percent late Tuesday.