FINANCIAL MARKETS : Dow Slides 35 in Late Selloff; Yields Rise After Note Sale
Blue-chip stocks suffered their ninth losing session in the past 11 on Wednesday, as a late selloff pulled the Dow Jones industrial average down to its lowest level since June 30.
In the broad market, smaller stocks edged higher, while bond yields rose modestly after a disappointing auction of five-year Treasury notes.
The Dow lost 35.57 points to 4,584.85, with 20 points of the decline occurring in the final hour of trading.
Analysts said the Dow’s fall below 4,600 triggered technical selling by traders who follow chart patterns. Computerized program sales also kicked in near the close.
Blue-chip shares have been edging lower since the Dow reached its all-time high of 4,736.29 on July 17. Analysts blame the Dow’s weakness on higher bond yields, a stronger dollar, greater interest in smaller stocks and a general desire to take profits after stocks’ sharp rally in the first half of the year.
Joseph Barthel, director of investment strategy at Fahnestock & Co., said the Dow now has slipped below its 50-day moving average, a sign that more consolidation lies ahead. The 50-day moving average was at 4,638, he said.
When market averages or stocks go below their 50-day moving averages, they often spend four to eight weeks below it and then resume the uptrend, Barthel said.
Most New York Stock Exchange stocks were dragged down with the Dow. Losers outnumbered winners by 13 to 9, though volume remained moderate at 291 million shares.
But in the Nasdaq market, winners had a slight edge, and the Russell 2,000 index of smaller stocks added 0.19 point to 304.51.
The bond market was no help to stocks. Long-term yields closed higher after the Treasury sold new five-year notes at an average yield of 6.37%, slightly above expectations. That was the highest auction yield on five-year notes since April.
The yield on the Treasury’s 30-year bond rose to 6.91% from 6.89% on Tuesday.
Another gain in a key commodity price index may have disturbed some bond traders. The Knight-Ridder Commodity Research Bureau index added 0.47 point to 239.91 after trading at a five-year high of 240.05 early in the day.
Elsewhere, the dollar was lower despite growing speculation that the German Bundesbank will trim its official discount rate today.
The dollar slipped to 1.483 German marks in New York from 1.487 on Tuesday, and to 96.60 Japanese yen from 96.85.
Among Wednesday’s highlights:
* Goodyear led the Dow lower, falling 1 1/2 to 39 1/2 on news that the Justice Department is investigating competition within the tire industry.
Other Dow stocks falling sharply included Boeing, off 1 1/4 to 63 5/8; International Paper, off 1 1/4 to 81 1/4; Disney, down 1 3/8 to 57 3/8, and Caterpillar, down 1 3/8 to 65 3/8.
* Steel stocks dropped after Nucor cut prices on some types of steel. Nucor fell 1 3/8 to 51 1/8, Bethlehem eased 1/4 to 14 3/4 and Inland was off 1 to 27.
* Technology issues were mixed. Microsoft fell 1 7/16 to 97 7/8 on the eve of its Windows 95 software launch. But Sun Microsystems soared 2 7/8 to 60 1/2, Apple added 3/4 to 45 1/2 and Cirrus Logic jumped 3 1/2 to 56 7/8.
* Among Southland issues, Biopool International surged 14/16 to 2 7/16 after receiving Food & Drug Administration approval for five new chemistry reagent systems.
Overseas, Tokyo’s Nikkei-225 index lost 145.79 points to 17,731.98. In Mexico, the Bolsa index slumped 46.31 points to 2,443.24 as the peso fell again.
