Blue Chips Fall Amid Interest Rate Worries
Faltering cyclical stocks contributed to a selloff on Wall Street Wednesday amid worries that rising interest rates will curb economic growth and crimp future corporate profits.
But the stock market managed to bounce off the bottom and finish above its worst levels thanks to an afternoon bond rally.
The Dow Jones industrial average fell 21.11 points to 3,598.71, standing just above its lowest close of the year at 3,593.35, reached April 4.
In the broader market, declining shares outnumbered advances by more than 5 to 3 on the New York Stock Exchange where trading was brisk. Big Board volume totaled 366.55 million shares, up from Tuesday’s 323.75 million.
All broad market measures lost ground. The NYSE composite index skidded 0.71 to 244.66 and the Standard & Poor’s 500 stock index shed 0.58 to 441.96.
The Nasdaq composite index of mostly smaller companies dropped 7.33 to 705.52.
Treasury bond yields fell for a second straight day, pushed lower mainly by technical trading known as short selling. In short-selling, traders borrow investments, then sell them immediately.
Yields were little changed for most of the day until buying picked up in the afternoon. At the close, the key 30-year Treasury bond’s yield fell to 7.31% from 7.37% late Tuesday.
The dominant forces influencing stocks included quarterly corporate income news and interest rate-related concerns.
Ricky Harrington, senior vice president and technical analyst at Interstate/Johnson Lane, said movements in individual stocks appeared to have a bigger impact than normal on the overall market.
Program trading tied to the bond market caused stocks to veer in varying directions throughout the session and intensified the volatility, he said.
Among the market highlights:
* American Telephone & Telegraph, which issued an upbeat quarterly report, rose 1 1/2 to 52 1/8, both in active turnover.
Weakness in cyclical stocks came amid strength in non-durable consumer stocks, whose earnings are not as closely linked to the swings of the economy.
* Caterpillar dropped 4 7/8 to 103 1/2 despite reporting a sharp rise in first-quarter profits. Other capital goods stocks were also hammered, with Deere & Co. off 4 7/8 to 75 5/8 and Clark Equipment down 5 3/8 to 58.
* Auto stocks, another cyclical group, tumbled. Ford fell 2 to 54 3/8, Chrysler lost 2 1/4 to 46 1/4 and General Motors ended off 5/8 to 54 5/8.
* Morton International, a maker of specialty chemicals and automobile air bag inflaters, dropped 10 1/8 to 82 3/4 despite strong quarterly earnings.
* Elsewhere, Compaq Computer reported first-quarter earnings well above analysts’ forecast, and the stock gained 3 1/8 to 101 7/8.
* Lotus Development lost 7 7/8 to 56 3/4. The software maker’s quarterly results showed lower-than-expected revenues.
Overseas stocks were mixed:
Tokyo stocks ended sharply lower with the Nikkei 225-share average was off 310.16 points or 1.54% to 19,882.18. London’s Financial Times 100-share average fell 29.7 points to 3,098.3. In Frankfurt, the DAX average ended at 2,182.64, up 10.22 points.
In other markets:
The dollar remained on a bearish track, falling against most major foreign currencies.
In commodities trading, light sweet crude oil for delivery in May settled up 33 cents at $16.82 per barrel on the New York Merc. It was the highest finish since before Thanksgiving. Gold and silver also posted gains.
