Upbeat Economic News Sends Stock and Bond Prices Down
Bonds and stocks suffered deep selloffs Thursday as upbeat economic reports revived inflation fears and sent long-term interest rates soaring to within a baby’s hair of 8.0%.
Adding to the gloom were a broad decline in the dollar and a healthy rise in commodity prices.
The Treasury’s 30-year bond yield surpassed 8.0% briefly, but by late in the day it had dipped below that psychological barrier, closing at 7.996%, down from Wednesday’s 7.89%. The last daily close of the long bond above 8.0% was in May, 1992. The long bond’s price, which moves in the opposite direction, sank 1 6/32 points, or about $11.88, for each $1,000 invested.
Government reports Thursday all showed an economy continuing to rise rapidly, a scenario that prompts fears of inflation eroding the value of bonds.
The Commerce Department said housing starts jumped 4.4% in September. They had been expected to fall.
A Philadelphia Federal Reserve Bank report showed unexpectedly strong regional manufacturing growth and rising prices in October.
And the Labor Department said first-time unemployment claims fell. They were expected to rise.
The dollar, meanwhile, fell to a two-year low against the German mark and the British pound after Treasury Secretary Lloyd Bentsen said the United States has no plans to intervene to prop up the greenback.
In New York, the dollar finished at 1.492 marks, down from 1.502 marks Wednesday and the lowest level since Oct. 19, 1992. At the same time, the British pound rallied against the dollar for an eighth consecutive trading session. Sterling ended at $1.632, up from $1.623.
The closely watched Commodity Research Bureau’s index rose 2.74 points to 233.91, further fanning inflation fears.
On Wall Street, earnings reports from a few prominent companies also helped push stock indexes lower and took the luster off an earnings season that so far has been favorable.
The Dow Jones industrial average lost as much as 41 points before paring those losses to close at 3,911.15, down 24.89 points.
In the broader market, declining issues outnumbered advancers by about 11 to 5 on the New York Stock Exchange, where volume totaled 331.46 million shares, up from 319.34 million Wednesday.
Among the market highlights:
* Dow component General Motors tumbled 3 3/4 to 43 1/8, after the auto maker’s third-quarter profit fell below analysts expectations.
* Other stocks falling after disappointing quarterly earnings were Kimberly-Clark, off 5 to 52 3/4 and Pet, down 1 5/8 to 17 3/4.
* IBM, another Dow component, fell 3/8 to 75, although its earnings were good.
* Microsoft surged 2 to 59 5/8 after posting earnings Wednesday that beat forecasts.
* Reliance Electric soared 5 1/8 to 29 5/8. The company, which recently agreed to be acquired by General Signal Corp. for $25 a share in stock, attracted a rival all-cash bid of $30 per share from Rockwell. Rockwell fell 3/8 to 36, while General Signal rose 1 1/4 to 35 3/8.
Overseas markets closed mixed. Stocks closed firmer in Tokyo, with the 225-share Nikkei average rising 123.03 points to 19,991.90. Frankfurt’s DAX 30-share average closed at 2.069.95, up 18.79 points, while in London, the Financial Times 100-share average edged up 2.4 points to 3,063.2. Mexico’s Bolsa index ended 6.77 points lower at 2,743.36.
Market Roundup, D6
