FINANCIAL MARKETS : Stocks Fall for 3rd Day; Bond Yields Ease
Stocks lost ground for the third consecutive session on Thursday amid continued worries about the prospect of higher interest rates. But bond yields eased and the dollar was flat.
The Dow Jones industrial average fell 14.47 points to 3,837.13, bringing its losses over the last three days to just under 100 points.
“It’s a pause in the decline,” said David Shulman, equity strategist at Salomon Bros. He believes the market is in the midst of a 10% pullback, or “correction,” like the one that struck last winter.
Stocks were mixed for most of the session, with the Dow bouncing in a narrow range. A wave of computerized selling late in the day assured a negative close.
A renewed surge in key commodities didn’t help stocks. Oil prices, for example, shot up, and gold continued to advance.
Still, the bears had only a slight edge on Wall Street. Declining issues outnumbered advancers by 1,154 to 1,007 on the New York Stock Exchange. Most broad market indexes were off marginally.
Traders said most investors remain focused on the potential for the Federal Reserve Board to hike short-term interest rates again, perhaps as soon as Tuesday--when central bank policy-makers meet.
Stocks had rallied sharply in late August and early September in part on the assumption that the Fed was months away from another credit-tightening.
But last Friday, government data showed that American manufacturing is operating near maximum capacity. And this week, the government reported a leap in the nation’s monthly trade deficit and a rise in housing starts, both of which fanned worries that the economy is stronger than the Fed would like.
The reports sent interest rates surging, triggering stocks’ slide.
On Thursday, Fed Chairman Alan Greenspan provided no real clue on the central bank’s current view of the economy. In testimony before Congress, Greenspan said the United States is experiencing “solid growth” but that the pace of growth had slowed since winter.
The bond market seemed somewhat calmed by Greenspan’s remarks. The yield on the 30-year Treasury bond eased to 7.78% from a two-year high of 7.80% on Wednesday. Shorter-term yields also were down slightly.
While many analysts believe the Fed will officially boost short-term rates next week, Salomon’s Shulman said he believes the Fed will wait until October, after viewing September economic data.
In any case, Shulman believes stocks will continue to decline in the near-term as some investors cash out after the summer rally, and as worries mount about how high interest rates can go as the world economy advances.
Among Thursday’s highlights:
* Shares in a variety of small biotech firms plunged after a brokerage that had helped finance them suspended operations, saying it was short of capital.
New York-based D. Blech & Co. notified the National Assn. of Securities Dealers that it was voluntarily withdrawing from the brokerage business. Rumors circulated that Blech chief David Blech was selling shares in biotech companies he owns to raise money.
Among biotech losers, Ecogen fell 1 15/16 to 3 15/16, Hemasure plunged 3 1/2 to 4 and Genemedicine tumbled 2 7/8 to 5.
* The Dow was dragged down by losses in Philip Morris, off 1 to 58 5/8; J.P. Morgan, off 1 1/4 to 60 1/8, and Boeing, off 5/8 to 43 3/8.
* One bright spot in the market was a recovery in some transportation issues, which had led this week’s slump. The Dow transport index added 5.98 points to 1,506.54. Federal Express rebounded 1 5/8 to 61 5/8 and American Airlines parent AMR gained 1 5/8 to 54 5/8.
* Some tech shares also were strong. Sun Microsystems zoomed 1 5/8 to 30, Oracle added 3/4 to 43 7/8 and Autodesk jumped 2 1/8 to 60 1/4.
* Quaker Oats leaped 4 1/8 to 80 5/8 on renewed takeover rumors.
* On the downside, NovaCare, which provides physical therapy services, sank 3 7/8 to 11 1/4 after saying first quarter earnings will fall well below forecasts.
Overseas, London’s FTSE-100 index inched up 6.4 points to 3,021.2 while Frankfurt’s DAX index eased 6.47 points to 2,073.03. In Tokyo, the Nikkei index fell 51.71 points to 19,833.67.
Among smaller markets, Hong Kong’s Hang Seng index dove 156.61 points to 9,668.14 on interest-rate worries. But Mexico City’s Bolsa index soared 33.68 points to 2,828.51, a six-month high, ignoring Wall Street’s losses.
In Seoul, South Korea, the bellwether stock index hit a record high, up 10.4 points to 1,034.09.
In commodities trading, oil futures for November soared 45 cents to $17.67 a barrel in New York, on reports of strong buying interest for North Sea Brent crude.
Gold futures for October advanced $1.20 to $395.80, the contract’s fifth straight gain.
