FINANCIAL MARKETS : Stocks, Bonds Dip as Hopes Dim on Rates
The stock market finished mixed but mostly lower Friday as fading hopes for another interest rate cut pushed bond yields higher.
Another selloff in key technology stocks also dampened Wall Street sentiment.
The Dow Jones industrials lost 17.26 points to 4,715.51, though the blue-chip index still gained 73.96 points for the week.
In the broad market, losers edged winners by 11 to 10 on the New York Stock Exchange in relatively modest trading.
Most key indexes fell with the Dow, but the Russell 2,000 index of smaller stocks eked out a 0.48-point gain to a record 299.23.
Traders said the market’s tone was weakened by a renewed rise in bond yields. The 30-year Treasury bond yield, which has bounced around all week, rose to 6.90% from 6.84% on Thursday, though it remained below the two-month high of 6.96% set a week ago.
Bond investors appeared to be spooked by news that the University of Michigan’s national consumer confidence survey showed a rise in confidence this month, suggesting that spending by individuals, which accounts for two-thirds of the economy, will climb.
Also Friday, the government reported that the nation’s gross domestic product grew by just 0.5% in the second quarter.
While that growth was clearly anemic, some analysts said components of the report show stronger-than-expected consumer activity--another indication that the economy may be poised to bounce back quickly.
If that’s the case, it could preclude any additional interest rate cuts by the Federal Reserve Board. Both bond and stock markets have been counting heavily on more Fed cuts, analysts note.
“The stock market is not priced so cheaply that it can ignore the bond market here,” said James Solloway, research director at Argus Research. “With bond yields knocking on 7%, which is quite unexpected, the bond market is key to future stock performance.”
Some analysts are also worried about renewed weakness in some technology stocks that have led this year’s market rally. Profit taking began in those stocks two weeks ago, and selling kicked in again Friday.
Among the market highlights:
* Microsoft led a steep decline in many tech issues on speculation that the Justice Department is close to filing an antitrust suit to stop shipments of the new Windows 95 program--expected to be a blockbuster product.
Microsoft tumbled 3 7/8 to 92 5/8, Adobe Systems dropped 3 1/8 to 62 1/4, Intel fell 1 1/2 to 67 1/8, Compaq lost 1 1/8 to 51, Applied Materials sank 3 3/8 to 101 7/8 and Datum dropped 1 3/8 to 16 1/8.
Also, American Power Conversion plunged 4 to 18 3/8 after the maker of power surge protectors for computers posted second-quarter earnings below expectations.
* On the plus side, some new tech stock offerings were rousing successes. Among them, Telcom Semiconductor went public at 8 1/2 and closed at 14.
* James River soared 7 1/4 to 33 after the maker of paper tissues announced a restructuring. Elsewhere, mutual fund firm Franklin Resources jumped 2 1/2 to 50 in the wake of a strong earnings report.
* Some industrial issues weakened, possibly on interest rate worries. Mobil fell 2 1/8 to 97 1/8, Caterpillar lost 1 to 69 1/4, Ford Motor dipped 1/2 to 29 1/4, GE eased 1/2 to 58 3/4 and Rockwell slipped 1/2 to 45 3/4.
