Investors slipped back into worry mode Thursday as newly bullish reports on the economy pumped up interest rate concerns.
Bond yields rose across the board, sending the Dow industrials down 23.55 points to 3,854.63.
Losers topped winners by 13 to 9 on the New York Stock Exchange. But most broad stock indexes fell less than the Dow in percentage terms.
The bond market’s troubles began with a government report that new-home sales surged in August, despite higher mortgage rates. News of an upward revision in second-quarter economic growth also spurred selling of bonds.
At the close, the yield on the 30-year Treasury bond was at 7.84%, a 27-month high and up from 7.81% on Wednesday.
Investors fear that faster growth will drive up inflation in the long run, and in the short run force the Federal Reserve Board to raise short-term interest rates further. On Tuesday, the Fed met to consider another rate hike but decided against it.
Financial markets weren’t helped by oil prices Thursday: November crude futures hit a six-week high, up 30 cents at $17.98 a barrel, benefiting mostly from technical end-of-quarter tradings.
Many Wall Streeters believe that third-quarter corporate earnings reports, which will begin to roll out next week, will be strong enough to allow investors to overcome rate worries--as occurred when the market rallied in August.
“The market seems to want to focus on economy and earnings,” said Hugh Johnson, analyst at First Albany Corp. But “every now and then, we’re reminded that inflation and interest rates are still a problem, and we end up taking a giant step backwards.”
Among Thursday’s highlights:
* Transportation stocks led the market lower, as airline shares dove on fare war concerns and other issues. The Dow transports index sank 19.32 points to 1,483.54, the lowest since mid-1993.
AMR, parent of American Airlines, fell 1 3/4 to 50 3/4; Delta lost 1 3/4 to 43 1/2; USAir dropped 1 to 4, and UAL, parent of United Airlines, slumped 3 3/4 to 87 1/4.
* Auto stocks also weakened. GM lost 7/8 to 46 3/4, Ford sank 1/2 to 27 1/2 and Chrysler dropped 1 1/8 to 44 1/8.
* Some drug stocks gave ground after rallying early in the week. Warner-Lambert lost 1 to 80 1/2, Pfizer fell 1 1/2 to 68 3/4 and Merck eased 3/8 to 35 1/4.
* Profit takers hit Alcoa, which slid 1 3/4 to 85 3/4, and Reynolds Metals, which fell 1 1/8 to 56 1/2. But many other key industrial issues were higher. Steel maker LTV surged 1 3/8 to 21 1/8, Monsanto gained 2 5/8 to 80, Rohm & Haas jumped 2 1/4 to 56 3/4, FMC added 1 1/8 to 61 5/8 and Parker-Hannifin leaped 1 5/8 to 39 3/4.
* Supermarket stocks jumped after Safeway reported strong quarterly earnings. Safeway rocketed 1 3/8 to 28 7/8, Kroger gained 3/4 to 26 3/8, Vons added 3/8 to 16 1/4 and A&P; was up 1 1/4 to 24 5/8.
* CBS tumbled 16 to 320 on further disappointment over its third-place showing among the four TV networks for the first week of the new season.
In Mexico City, the Bolsa index dropped 47.31 points to 2,717.51, as investors continued to respond fearfully to Wednesday’s assassination of the ruling party’s secretary general.
In U.S. trading of Mexican shares, Telmex sank 1 1/4 to 62.
Elsewhere among foreign markets, London’s FTSE-100 index dove 46.2 points to 2,992.5 as interest rate fears there mounted. Frankfurt’s DAX index also tumbled, off 24.53 points at 2,043.58.
In Tokyo, the Nikkei index gained 107.52 points to 19,615.12.