STOCKS : Interest Rate Jitters Send Dow Down 29
The stock market lost another round in its battle with higher interest rates Monday, sliding for the fourth straight session as bond yields continued to rise.
The Dow Jones index of 30 industrial stocks dropped 29.28 to 2,666.67, extending its loss since last Tuesday to 99.10 points.
In the broader market, declining issues outnumbered advances by nearly 4 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 328 up, 1,229 down and 425 unchanged.
Big Board volume retreated to 136.15 million shares, from Friday’s 174.26 million.
Analysts said fears of rising interest rates kept a dominant influence on the mood of investors.
Bond prices fell steeply last week--pushing their yields to the highest levels in a year--on worries of rising inflation and talk that Japanese investors were big sellers of U.S. bonds. As bond prices fall, their yields rise.
The selloff in bonds has pummeled stocks.
Federal Reserve Board Vice Chairman Manuel Johnson heightened concerns when he said inflation remains a problem here and abroad. Traders interpreted his remarks to mean the Fed may tighten credit, forcing rates higher still in an effort to choke off inflation.
Among individual stocks, Time Warner, which posted a first-quarter loss, slipped 1 3/4 to 92 5/8. King World Productions slumped 1 3/4 to 35 1/2, which some traders attributed to disappointment that takeover rumors surrounding the stock haven’t panned out.
McDonnell Douglas, which reported disappointing first-quarter results after the close Friday, slid 3 7/8 to 51 1/4. A number of analysts cut earnings estimates.
Prices on the Tokyo Stock Exchange also closed lower Monday in dull trading. The Nikkei index of 225 selected issues fell 156.37 points to close 29,679.07.
In Frankfurt, the DAX index plunged 2.5% to 1,837.50, in part a reaction to growing militancy on the part of the country’s largest union, traders said. Share prices were also lower on London’s Stock Exchange amid worries over interest rates. The Financial Times 100-share index fell 27.9 points to end the day at 2,159.2.
CREDIT Bond Prices Drop in Cautious Trading In the credit markets, bond prices slipped in light trading, echoing declines overseas as the market awaited economic reports due later this week.
The Treasury’s benchmark 30-year bond fell 7/32 point, or about $2.19 per $1,000 face amount. Its yield, which rises when prices fall, rose to 8.96% from 8.94% Friday.
The last time the yield on the 30-year bond was as high was last May 11, when it stood at 9.07%.
The 30-year bond has plunged more than $41 per $1,000 over the past seven trading days in response to signs of increasing inflation, a stronger economy and worries about upcoming bond issues, including the Treasury’s quarterly refunding set for next month.
There were few forces acting on the bond market Monday except for a softness in prices in overseas trading before U.S. trading began, said William V. Sullivan, director of money market research for Dean Witter Reynolds.
Today, the government is scheduled to release reports on durable goods orders for March and the employment-cost index for the first quarter, while the first report on the gross national product for 1990 is set to be announced Friday.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.188%, unchanged from Friday.
CURRENCY Dollar Climbs as Mark Heads Lower In foreign exchange trading, the dollar rose against most major currencies, benefiting from the West German mark’s weakness.
Speculation that U.S. interest rates will continue to move higher as the economy continues to expand also encouraged dollar buying, dealers said.
Gold prices were mixed, rising in New York after falling in some overseas markets. On the New York Commodity Exchange, gold bullion for April delivery settled at $378.90 an ounce, $2.30 higher than Friday’s close.
Ronald Holzer, chief currency dealer at Harris Trust in Chicago, said the mark was sold heavily amid worries about the consequences of planned German unification.
The governments of East and West Germany have said they will merge their economies on July 1 as a prelude to full unification, expected next year. But the governments haven’t reached a final pact on linking their currencies.
In Tokyo, the dollar fell to a closing 157.55 Japanese yen from 157.60 yen at Friday’s close. Later, in London, it was unchanged. In New York, the dollar settled at 157.55 yen, up from 157.50 yen on Friday.
The British pound rose to $1.6365 in London from $1.6357 late Friday. Later in New York, sterling dipped to $1.63565 from Friday’s $1.6388.
COMMODITIES Pork Bellies Rise the Trading Limit Prices of most pork belly futures contracts surged the permitted daily limit of 2 cents a pound on the Chicago Mercantile Exchange after an Agriculture Department report showed smaller supplies than traders had anticipated.
On other commodity markets, hog futures rallied while cattle futures were mixed; orange juice futures fell sharply; oil futures advanced; cotton was up; precious metals were mixed, and grain and soybean futures were mixed.
Frozen pork belly futures settled 1.1 to 2 cents higher, with the contract for delivery in May up 2 cents at 64.32 cents a pound.
The run-up in the belly market had been expected since late Friday, when the USDA released a monthly report showing 97.5 million pounds of the raw bacon meat in the nation’s commercial freezers at the end of March.
