FINANCIAL MARKETS : Stocks Weaken, Players on Sidelines
Lingering concerns over the federal budget impasse weakened stock prices Tuesday, stopping the Dow Jones industrial average from reaching its fifth straight record high.
The Treasury market ended mixed, with yields on long-term bonds rising but shorter-term securities posting slight yield declines as traders remained nervous about the federal impasse.
The Dow industrials dipped 1.09 points to 4,871.81, slipping just below a record-setting level in the final minutes of trading. At one point earlier, heavy buying of a few blue-chip stocks had sent the Dow up nearly 19 points.
Technology shares plunged, sending the Nasdaq composite index down 17.84 points to 1,049.62.
The market’s moves were stemmed by the budget debate, with many players choosing to stay on the sidelines until some resolution was reached.
“We are playing a wait-and-see game,” said Brian Belski, a technical analyst at Dain Bosworth Inc. in Minneapolis. “We know nothing catastrophic is going on, but we want to remain careful just in case this doesn’t get resolved soon.”
The yield of the Treasury’s main 30-year bond rose slightly to 6.28% from 6.27% late Monday.
The yield rise came amid pessimism that Federal Reserve Board policy-makers will cut short-term interest rates today in their regularly scheduled meeting. Almost no one expects the Fed to act in the midst of the budget stalemate.
Adding uncertainty in the market was a huge supply of new securities going on sale this week and next. Concern about the market’s ability to absorb the supply knocked down bond prices from earlier gains triggered by news of sluggish retail sales last month. Bond prices move in opposite direction from yields.
In addition, participants are not sure about which government statistics will be released this week. The government has sent thousands of federal workers home, and it was unclear whether federal statisticians were among the nonessential personnel.
The fresh supply of securities is part of an emergency plan disclosed by the government Monday to pay off $102 billion in principal and interest due this week.
With Congress and the Clinton Administration unable to agree on authorizing government spending and increasing the debt limit, the Treasury Department has said it will temporarily draw on two huge government-run retirement funds.
The move effectively lifts the ceiling on the government’s debt. In a second wave of emergency auctions Tuesday, the Treasury raised $57.6 billion in cash by selling short-term securities to pay off its debts. All told, the Treasury will raise $137 billion this week and next to pay off principal and interest due Wednesday and Thursday and to replenish government coffers.
Meanwhile, the Dow industrials were ahead for most of the trading day, boosted by a rally in shares Minnesota Mining & Manufacturing Co., which announced a broad restructuring plan that will eliminate 5,000 jobs. 3M shares rose 2 5/8 to 61 5/8.
But the broader markets came under pressure from the budget debate and a selloff of technology shares, spurred by the reported downgrade of chip makers Micron Technology and Texas Instruments by SoundView Financial Group, which is closely followed for its analysis of technology companies.
“Technology stocks have been rallying for most of the year,” said Steven Goldman, a market strategist at Weeden & Co. in Greenwich, Conn. “Then we have these downgrades, and that takes the winds out of the sail.”
On the Big Board, Micron Technology shares tumbled 4 3/4 to 56 7/8, while Texas Instruments was down 2 at 60 1/4. Other technology stocks also dropped in Nasdaq trading, including Applied Materials, off 3 7/8 at 46, and Intel, down 2 at 65 1/8.
Declining issues led advancers by 13 to 9 on the New York Stock Exchange. Big Board volume rose to 354.42 million shares from 295.84 million on Monday.
Among the market highlights:
* Shares of brokerage firms and banks, which are sensitive to interest rate fluctuations, closed lower. Merrill Lynch fell 1 at 56 7/8, Morgan Stanley slipped 1 at 85 3/4, Chase Manhattan was off 1 3/4 at 57 3/8 and BankAmerica dropped 2 3/8 at 58 7/8.
Wells Fargo shares slid 4 1/8 to 206 1/4 amid concern that its bid for First Interstate may take more time before being decided. Rival suitor First Bank System lost 3/4 at 52 1/4, while First Interstate shed 2 1/2 to 130 7/8.
* USAir lost 3 3/4 to 11 5/8 after United Airlines’ parent UAL Corp. called off acquisition talks with the carrier. UAL rose 2 3/8 to 185.
* Home Depot rose 1 7/8 to 43 1/2 after posting better than expected third-quarter results. Wal-Mart lost 1/2 at 23 3/8 on lower than expected profit.
Overseas, London’s FTSE-100 index ended up 11.1 points at 3,547.9, while Tokyo’s Nikkei ended up 13.05 points at 17,802.51. Mexico City’s Bolsa index fell 12.54 points, or 0.56%, to 2241.53.
The dollar fell on concern about the budget stalemate. In late trading, the dollar slipped to 101.66 Japanese yen, from 101.90 yen on Monday.
