FINANCIAL MARKETS : Bond Market Again Fearful of Rate Hike

From Times Wire Services

Stocks ran in place for a third day Thursday as bond yields rose amid fears that today's report on wholesale prices will prompt another run-up in interest rates. Posting its third consecutive single-digit loss after rising for five straight days, the Dow Jones industrial average fell 2.69 points to close at 3,932.68.

In the broader market, advancing issues edged out decliners by 1,136 to 1,092 on the New York Stock Exchange. Big Board volume was moderately heavy at 325.58 million shares, up from 320.21 million on Wednesday.

Investors awaited today's release of January producer price index figures, which are expected to show a 0.4% increase in prices paid by manufacturers.

Stocks were also responding to the rise in bond yields. At the close, the Treasury's main 30-year bond yield was 7.68%, up from Wednesday's 7.65%. Its price, which falls when yields rise, closed down 13/32 point, or $4.06 per $1,000 invested.

In addition to the inflation report, the bond market was fearful of a supply glut from $40 billion in new issues this week.

Some analysts are predicting a bearish producer prices report. Inflation tends to erode the value of fixed-income securities such as bonds. Recent news about the inflation threat has been mixed, but January's weaker-than-expected employment figures had made some market players optimistic.

Stock investors have stepped up their purchases of recession-resistant names in the last two weeks, believing that the Fed may be finished raising rates, that interest rates may have topped out and the economy is headed for a downturn.

The NYSE's composite index fell 0.46 point to 261.21 and the Standard & Poor's 500-stock index fell 1.00 point to 480.19.

But computer stocks advanced again, pulling some broad market indexes higher. The Nasdaq composite index rose 1.67 points to 785.44. The American Stock Exchange's the market value index rose 0.39 point to 446.33.

Among Thursday's highlights:

* Compaq Computer rose 7/8 to 37 3/4, and IBM added 5/8 to 74 7/8. Intel gained 7/8 to 77 1/2.

* Micron Technology Inc. gained 2 1/4 to 50 1/8, Hewlett-Packard added 2 7/8 to 106 1/8 and Apple Computer ended up 1 5/16 to 43 5/8.

* Texas Instruments advanced 3 3/8 to 78 3/8 and AST shares rose 7/16 to 15 7/16. The two companies reached a six-year licensing deal settled a patent dispute.

* Amgen fell 4 to 66 3/4, reversing an earlier modest gain, after Bristol-Myers Squibb denied that it is in talks to acquire the biotechnology company. Bristol-Myers shares declined 1/4 to 60 5/8 on the Big Board.

* Allied Signal fell 1 1/8 to 36 7/8, and Caterpillar lost 5/8 to 52 5/8. They were followed by Disney, off 3/4 at 52 1/2, and Coca-Cola, down 3/4 to 52 1/2.

* Leading the Dow 30 on the up side were Alcoa up 1 7/8 to 79 7/8, amid a resurgence in aluminum shares.

* AT&T; rose 5/8 to 51 3/4 after Federal authorities accused 17 people of illicit trading of the company's shares.

* America Online Inc. leaped 3 1/8 to 65 7/8 after reporting that its second quarter revenues more than tripled.

* Telefonos de Mexico fell 1 1/2 to 32 1/4.

Overseas markets were mixed. In Frankfurt, the DAX 30-share average ended up 25.07 points at 2,112.69, while London's Financial Times 100-share average gained 26.5 points to close at 3,099.0. Tokyo's 225-share Nikkei average fell 190.70 points to 18,099.55 and Hong Kong's Hang Seng index rose 120.05 points to 8,054.88.

Mexico's Bolsa index dropped 25.49 points to 1,935.32, five points off its session low.

Market Roundup, D6

Interest Rates:

30-year T-Bond: 7.68%

1-year T-Bill: 6.77%

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