Dow Down 6.19 After Roller-Coaster Day
Stock prices lost ground today--but recovered from early steep losses--in an erratic session that followed the rejection of a government budget plan.
The Dow Jones average of 30 industrials dropped 6.19 to 2,510.64, reducing its gain for the week to 58.16 points.
Declining issues outnumbered advances by more than 3 to 2 on the New York Stock Exchange, with 588 up, 903 down and 460 unchanged.
Big Board volume totaled 153.38 million shares, against 145.41 million in the previous session.
The NYSE’s composite index fell .63 to 170.70.
Prices had dropped 60 points after about 15 minutes of trading this morning after the overnight news that the House had defeated the budget proposal worked out last weekend by President Bush and congressional leaders.
Analysts said that development dismayed investors who had pinned their hopes on some tangible signs of progress in the struggle to narrow the government’s chronic deficit.
But after the initial wave of selling passed, the market steadied and even managed gains in the 25-point range until the close. Brokers said hopes lingered that the White House and Congress might come up with an alternative budget plan.
Separately, the Labor Department issued monthly statistics showing an increase in the unemployment rate and a drop in nonfarm payroll employment.
The figures, which came in a bit weaker than expected, were taken as corroborating evidence that the economy is close to or already in a recession. Some observers also saw them, however, as cause for hope that interest rates might soon decline.
Bond prices fell in volatile morning trading today as the failure to reach a federal budget accord overshadowed another rise in unemployment.
The Treasury’s benchmark 30-year bond was down 7/16 point, or $4.38 per $1,000 face amount, around midday. Its yield, which rises when prices fall, rose to 8.83% from 8.79% late Thursday.
Bond traders said the budget rejection made it unlikely the Federal Reserve would take quick action to lower interest rates to spur the slumping economy, which would boost the value of fixed-income instruments such as bonds.
The bond market for weeks has awaited a Fed easing and pinned its hopes to the budget deal.
“The market is realizing that without any federal budget accord, the Fed probably won’t ease,” said Kevin Flanagan, a money market economist with Dean Witter Reynolds Inc.
Treasury bills dropped sharply at the market’s opening, with the discount yields on three-month and one-year bills dropping below 7% for a short time for the first time since August, 1988. All maturities staged a midmorning rebound.
In the secondary market for Treasury bonds, prices of short-term governments were unchanged to down 1/16 point, intermediate maturities were 1/16 point to 1/4 point lower and long-term issues were off 7/16 point, according to Telerate Inc..
