FINANCIAL MARKETS : Bond Yields Fall on Rate-Cut Hopes
Treasury bond yields finished lower Wednesday, as comments by Federal Reserve Board Chairman Alan Greenspan boosted optimism that the central bank will cut interest rates soon. Stock prices edged down as investors took profits in technology shares.
The benchmark 30-year bond’s yield fell to 6.54% from Tuesday’s 6.58%. Its price, which rises when yields fall, finished up 5/8 point, or $6.25 per $1,000 in face value.
In a speech late Tuesday, Greenspan said growth is slowing, but he stopped short of saying another cut in short-term interest rates is needed to stimulate growth.
Lower rates would strengthen the value of bonds and other fixed-income investments already in circulation.
Still, the bond market was helped by Greenspan’s characterization of a slowing economy with easing inflationary pressures.
Yields on three-month Treasury bills fell to 5.57% as the discount dropped 0.07 percentage point to 5.41%. Six-month yields fell to 5.62% as the discount fell 0.05 point to 5.39%. One-year yields dropped to 5.58% as the discount fell 0.05 point to 5.29%.
Despite profit taking, the stock market’s losses were kept to a minimum as investment managers added high-performing equities to their portfolios before the end of the quarter.
The Dow Jones industrial average edged down 3.46 points to close at 4,547.10, after trading within a narrow 17-point band throughout the day.
Advancing issues were nearly neck-and-neck with decliners on the New York Stock Exchange. Big Board volume was heavy at 398.22 million shares, up from 384.30 million on Tuesday.
Softness in the technology sector helped push broad market indexes lower. The NYSE’s composite index fell 0.15 point to 291.61. The Standard & Poor’s 500-stock index fell 1.00 point to 543.98, and the Nasdaq composite index fell 0.64 point to 929.19.
The Fed released its “beige book” of economic assessment, confirming that the economy is softening and heightening stock investors’ fears that corporate earnings may suffer from the downturn.
Among Wednesday’s highlights:
* Investors took some profits in the technology sector, which has been performing well in the past few weeks. Micron Technology fell 3 to 54 3/4, IBM dropped 5/8 to 97 1/8 and Advanced Micro Devices slipped 1 1/8 to 35 3/8. Intel fell 57/64 to 64 7/64, Novell fell 3/8 to 20, Microsoft fell 1/2 to 90 7/8 and Lotus Development fell 3/16 to 62 3/4.
* Whirlpool fell 2 5/8 to 53 3/8 after it also issued a profit warning on its second quarter.
* Some brokerage stocks rose after Lehman Bros. reported higher-than-expected second quarter earnings. Lehman rose 3/8 to 22 1/4, Charles Schwab gained 2 5/8 to 43 1/4, Morgan Stanley rose 2 7/8 to 82 3/4 and Merrill Lynch rose 1/2 to 51 3/8.
* Oil stocks fell, taking their cue from a drop in oil prices amid fears that OPEC may boost production in a bid to bring non-OPEC producers to their knees. Arco fell 1 1/2 to 112 3/8, Mobil tumbled 1 3/8 to 96 7/8, Amoco fell 1 3/8 to 66 3/4 and Exxon slid 7/8 to 69 1/4.
Overseas stocks closed higher. Tokyo’s 225-share Nikkei average gained 285.51 points to end at 14,951.21. In Frankfurt, the 30-share DAX average closed at 2,143.69, up 7.01 points, while London’s FTSE-100 average rose 1.1 points to 3,378.3. Mexico’s Bolsa index gained 16.35 points to close at 2,018.60.
Market Roundup, D8
* SURPRISING SALE
L.A. County note offering goes better than expected. A22
