FINANCIAL MARKETS : Dow Off 27 as Yields Rise; Tech Stock Mania Fades
The Dow Jones industrial average on Thursday dropped to its lowest level since July 21, reflecting waning demand for blue chips as the market drags through the summer dog days.
The Dow fell 27.83 points to 4,643.66 in a late selloff driven by computerized program selling.
A rise in bond yields, as the Treasury concluded its quarterly “refunding” auction of new securities, undercut stocks.
In the broad market, losers outnumbered winners by 12 to 10 on the New York Stock Exchange, and the Nasdaq market also was mostly lower as technology shares took a breather.
Tech issues had led Nasdaq higher on Wednesday, powered in large part by the stunning debut of Netscape Communications. The software firm’s stock, eagerly awaited by investors, soared from an initial offering price of 28 to 58 1/4 by the close on Wednesday.
But many of the buyers on Wednesday turned into sellers on Thursday, and Netscape fell 6 7/8 to 51 3/8, closing at its lowest level of the day.
Other key tech stocks also weakened. But they could rebound today: After the market closed the semiconductor industry’s chief trade group reported a surge in semiconductor orders in July.
Elsewhere on Thursday, bond yields continued their upward creep as investors expressed disappointment with the reception for the Treasury’s new 30-year bonds. The average yield on the $11.5-billion in bonds sold was 6.906%--below expectations--but dealers said there was weak follow-through bidding.
By the close the yield on the 30-year bond was at 6.94%, up from 6.92% on Thursday.
Some traders said the government’s weekly jobless claims report suggested a strengthening economy, a bad sign for interest rates. At the same time, the July wholesale inflation report showed a slight dip, indicating inflation remains restrained.
One potential positive for bonds: the dollar continues to rise. It closed at 1.419 German marks in New York, up from 1.406 Wednesday, and at 92.62 Japanese yen, up from 91.61. Early today in Tokyo the dollar hit 93.40 yen, a five-month high.
In theory at least, a stronger dollar should bring more foreign investors into U.S. securities, particularly bonds. However, Japanese investors weren’t believed to have been big buyers of the 30-year T-bonds on Thursday.
Among the market highlights:
* Tech stocks hit by profit taking included Intel, down 1 7/8 to 64 1/4; Microsoft, down 2 3/8 to 94 1/8; Motorola, off 1 3/8 to 75 3/8, and Ascend Communications, down 4 1/4 to 69 5/8.
Gandalf Technology plummeted 1 7/8 to 9 on a disappointing earnings report, but strong results reported by America Online sent its stock up 5 1/4 to 65 1/4.
* The Dow was dragged down by International Paper, which fell 2 3/8 to 82 3/8 amid rumors that cardboard makers are offering price discounts, suggesting weakness in demand.
Other paper and lumber stocks falling included Georgia-Pacific, down 1 1/4 to 89 3/4; Weyerhaeuser, down 1 3/8 to 46 1/4, and Champion International, down 1/2 to 53 1/4.
* Persistent weakness in shares of Caterpillar also hurt the Dow. It fell 1 3/8 to 63 5/8. The stock recently peaked at 75 1/4.
In foreign trading, Tokyo’s Nikkei-225 stock index eased despite the dollar’s strength.
In Mexico City, the Bolsa index continued to push higher, rising 19.86 points to 2,570.52.
