FINANCIAL MARKETS : Dow Flirts at 4,100 Before Dipping
A sudden afternoon selloff in the bond market pushed interest rates higher on Tuesday, driving stocks down and snapping a three-session string of record-setting advances in several stock indexes.
New inflation concerns stemming from a surprisingly strong retail sales report pushed up the yield on the Treasury’s benchmark 30-year bond by 0.05 point to 7.44% from Monday’s 7.39%. Its price, which moves in the opposite direction, fell 5/8 point, or $6.25 per $1,000 in face value.
Yields turned sharply higher in the afternoon after a weekly report by the Johnson Redbook Service showed retail sales up a surprising 0.6% in the first three weeks of March, compared with February.
A rapid increase in sales could be a sign that the economy is growing too fast and increases in inflation may be coming soon. Since inflation hurts the value of fixed-rate investments like bonds, some traders saw the report as a reason to sell.
The Dow Jones industrial average, which temporarily traded above 4,100 before abruptly reversing course in late trading, finished down 11.07 points at 4,072.61.
Market measures covering a wider range of stocks also lost ground. The New York Stock Exchange composite index fell 0.47 point to 267.58, Standard & Poor’s 500 index dropped 1.08 points to 495.07 and the Nasdaq stock market composite shed 0.71 point to 809.78. All three had hit record highs on Monday.
In the broader market, declining issues outnumbered advancers by about 11 to 9 on the Big Board where volume swelled to 367.12 million shares, up from 301.75 million on Monday.
Stock tracked the bond market throughout the day. Modest bond buying that materialized in mid-morning, which coincided with a recovery in the dollar from a record low against the Japanese yen, supported stocks for much of the session. But the support vanished in the afternoon when bonds reacted negatively to the strong retail sales reading.
Among Tuesday’s highlights:
Despite the late-session selloff, technology stocks continued in their market leadership role. Micron Technology rose 1 1/8 to 74 7/8, Hewlett-Packard added 1 1/4 to 122 5/8 and Apple Computer tacked on 1 to 36 1/4. But IBM lost 1 1/4 to 82 1/4.
* Kmart rose 1 to 13 as investors welcomed news that Joseph Antonini has resigned as chief executive and president of the nation’s third-largest retailer.
* Loral Corp. said it was acquiring the Defense Systems business of Unisys Corp. for $798 million in cash. Loral gained 1 to 43 7/8 while Unisys slipped 1/2 to 9 1/4.
* Digital Microwave lost 2 5/8 to 13 1/8 after saying that its results for will fall below expectations.
* Chrysler dropped 1 1/4 to 38 5/8. The auto maker’s models received poor quality ratings in a Consumer Reports magazine article on reliability.
* Ford was unchanged at 25 3/8 and General Motors was unchanged at 40 3/4.
Elsewhere foreign market activity didn’t provide much inspiration for U.S. investors. Stocks finished higher in London and lower in Frankfurt. Financial markets were closed in Japan for a spring holiday.
