Stocks Retreat in Selling Wave; Dow Loses 19 : Market Overview
* Anxiety over rising interest rates, combined with continued profit taking in small growth stocks, depressed Wall Street across the board Thursday.
* Bond yields jumped on new signs of an improving economy.
Stocks
As many traders anticipated, jubilation over the North American Free Trade Agreement’s passage in the House of Representatives had already been reflected in stock prices. With the news in hand, investors decided to sell.
The Dow Jones industrial average, down as much as 36 points late in the day, closed with a loss of 19.01 points at 3,685.34.
In the broader market, declining issues outnumbered advancing ones about 8 to 5 on the New York Stock Exchange in active trading.
As on Wednesday, selling was concentrated in the Nasdaq market of smaller stocks, home of many recently hot growth issues. The Nasdaq composite index slumped 8.02 points, or 1%, to 754.34, after tumbling 9.33 points Wednesday.
Analysts said the extent of the profit taking in the market overall, on heavy share volume, suggested that Wall Street may be in the throes of a significant pullback.
Among the market highlights:
* Telecommunications stocks were hit hard for a second day. Many of the stocks had soared in summer and early fall. Ericsson plunged 7 7/8 to 42 5/8, DSC Communications sank 4 to 58, Newbridge Networks lost 3 1/2 to 54 1/2, Nextel dropped 2 3/4 to 35 7/8, Dial Page lost 3 1/4 to 50 1/4 and Tellabs gave up 2 3/4 to 60 3/4.
* Among battered tech issues, Motorola fell 4 1/8 to 95 5/8, Lotus Software dropped 1 7/8 to 46 3/4, Intel lost 1 to 57 7/8 and Rainbow Technologies eased 3/4 to 22.
* Frequency Electronics dropped 2 5/8 to 5 1/8 after it disclosed that a federal grand jury has charged it with defrauding the government on various defense contracts.
* Golf-related stocks, another formerly hot group, fell sharply. Callaway Golf dropped 1 3/4 to 47 1/4, Aldila lost 3/4 to 25 3/4 and Royal Grip tumbled 1 1/4 to 14 1/4.
* Brokerage stocks continued to slide. Morgan Stanley fell 1 1/4 to 72 5/8, Schwab lost 1 3/4 to 31 and Merrill Lynch sank 3/4 to 90 1/4.
* Industrial stocks were mixed. Caterpillar slumped 2 1/8 to 85 7/8 and Deere fell 7/8 to 71 1/8, but GM gained 7/8 to 54 5/8, Dow Chemical rose 1 1/8 to 57 3/4 and ITT added 3/4 to 93 1/4.
* Chevron helped pull the Dow index down, plunging 4 to 89 after Pennzoil said it sold about half its stake in Chevron. Pennzoil rose 5/8 to 58 1/8.
In foreign markets, Mexico City stocks closed higher, continuing to gain on optimism about NAFTA’s potential to boost the Mexican economy. The Bolsa index ended 17.68 points higher at a record 2,166.18.
In Toronto, reaction to the House vote on NAFTA was muted. The TSE-300 index eased 1.76 points to 4,234.74.
In Germany, the DAX average added 13.62 points to 2,085.34. Tokyo’s Nikkei-225 average gained 57.61 points to 18,166.32, and London’s FTSE-100 index added 5.5 points to 3,125.5.
Other Markets
Pressure on bond prices began first thing in the trading day, as the Labor Department reported an unexpected decline in first-time claims for unemployment benefits.
By the close, the Treasury’s 30-year bond yield shot up to 6.24% from 6.17% on Wednesday. Shorter-term yields were also up sharply.
The government said applications for jobless benefits fell by 20,000 last week, after the previous week’s jump lifted the number to a 15-week high. Many economists had predicted that new unemployment claims would drop by about 2,000.
Also, the Federal Reserve Bank of Philadelphia released its monthly manufacturing sector index showing improvement in that critical economic area.
Bond owners increasingly fear that a stronger economy implies a rise in interest rates and inflation in 1994.
In other markets:
* The dollar moved up slightly on a variety of factors, including the NAFTA vote in Congress, positive signals for the U.S. economy and an expectation of falling interest rates in Europe.
* Gold fell 40 cents to $376.40 an ounce on the New York Comex. Silver for current delivery closed at $4.671 an ounce, up 7 cents.
* Light, sweet crude oil for December delivery fell 35 cents, settling at $16.69 a barrel on the New York Merc, in a reversal of Wednesday’s rally. Traders are losing hope that OPEC can restrain production to end the world oil glut.
Market Roundup, D6
