Inflation Jitters Rattle Stocks as Bond Yields Soar : Wall Street: Dow industrials plummet 34.56. Precious metals and grains advance sharply. Oil prices hit a 14-month high.
Stocks tumbled and bond yields rose sharply Friday in a panic about inflation, as precious metals and grains soared and oil prices hit a 14-month high.
The Dow Jones industrial average fell 34.56 points to 3,776.78, though the widely watched barometer gained 3.33 for the week.
The yield on the benchmark 30-year Treasury bond soared to 7.44% from Thursday’s close of 7.35%. Its price, which moves in the opposite direction, dropped 15/16 point, or $9.38 per $1,000 in face value.
Stock investors don’t like to see credit market interest rates rise because that increases the cost of money to companies and makes shares less attractive relative to interest-bearing investments.
The bond market selloff came as the dollar slid to an eight-month low against the German mark. A weak dollar increases the cost of imports and can indicate inflation down the road.
The dollar dropped to 1.611 German marks from 1.632 on Thursday. It also relinquished all of Thursday’s gains against the Japanese yen, falling to 102.80 from 103.25.
Gold prices surged due to the dollar’s slump and inflation fears.
On New York’s Comex, gold shot up $6.20 to $391.60 an ounce. Light, sweet crude oil for July delivery was 80 cents higher at $20.71 a barrel on the New York Merc. It last reached that price on March 8, 1993.
The most compelling evidence of higher inflation was the Commodity Research Bureau’s index of 21 futures contracts, which rallied 2.10 points to 239.38.
The inflation worries touched off fears that the Federal Reserve Board will be forced to push interest rates higher sooner than expected to check inflation pressures. Higher rates on new securities would tend to hurt the value of fixed-income instruments.
Some analysts said they were reluctant to read much into the session’s activity, given the volume tied to the quarterly triple witching.
Those quarterly expirations of stock index futures, stock index options and options on individual stocks mean many market participants must realign their portfolios, which typically leads to volatility in prices.
More than 129 million shares traded in the first half-hour as expirations-related program business flooded in. It was the third-most-active opening half-hour to date at the New York Stock Exchange.
“There is some expirations distortion, no question,” said Paul Hennessey, vice president of trading at Boston Co.
Declining issues outnumbered advances by about 13 to 7 on the Big Board, where 386.99 million shares changed hands, up sharply from Thursday’s 256.39 million shares.
Smaller-company stocks were among the hardest hit, with the more volatile technology stocks ending the day sharply lower. The Nasdaq composite index tumbled 5.62 to 729.35, losing 4.90 in the week.
Stocks mostly fell abroad, but in Tokyo, the Nikkei 225-share average ended 135.83 points higher at 21,503.30. London’s Financial Times 100-share average closed down 7.2 points at 3,022.9.
In Frankfurt, the DAX 30-share average finished the week at 2,050.72, down 4.19 points. Mexico City’s Bolsa index dropped 16.3 points to 2,310.05.
Among other major market indicators, the Standard & Poor’s index of 500 stocks fell 3.48 to 458.45, losing 0.22 for the week, while the NYSE’s composite index fell 1.70 to 253.29, losing 0.30 over seven days. At the American Stock Exchange, the market value index lost 1.52 to 440.26, dropping 1.58 in the week.
Among the market highlights:
Unisys led the NYSE most-active list, ending unchanged at 9. The company said second-quarter earnings will be lower than the 17 cents a share in the first three months of the year. Lehman cut earnings estimates for the company.
* Quaker Oats rose 7 3/8 to 78 1/2. The stock rallied amid takeover rumors, but the company declined to comment on them.
* Cheyenne Software lost more than half its value, falling 8 3/8 to 8. The company forecast fiscal fourth-quarter results below expectations.
* Valence Technology fell 2 1/8 to 3 7/8 after it reported a 33-cent-a-share fourth-quarter loss and said it expects delays in shipping first-generation batteries to Hewlett-Packard.
* Medalist Industries, maker of industrial fasteners, dropped 5 to 8 1/4 after forecasting a second-quarter loss.
* EMC rose 1 to 14 5/8 after the company said it is ahead of schedule in manufacturing its new 5000 Series mainframe storage devices.
* IDB Communications Group gained 13/16 to 8 9/16. Smith Barney revised downward some earnings estimates for the company.
* New York Times gained 1/2 to 24 3/4. The company has agreed to sell its women’s magazine division to a unit of Bertelsmann.
Market Roundup, D4
