Rise in Yields Leaves Stocks Mostly Lower
The stock market took a breather Wednesday as bond yields turned upward again.
The Dow Jones industrials eased 12.65 points to 5,629.77 from Tuesday’s record high, and losers slightly outnumbered winners on both the New York Stock Exchange and on Nasdaq.
By recent standards it was a fairly dull day on Wall Street, except for another tumble in semiconductor stocks and a jump in many oil issues.
But in the bond market, sellers were in full control, sending yields sharply higher. The bellwether 30-year Treasury bond yield jumped from 6.37% on Tuesday to 6.46%, just under the five-month high of 6.47% reached Feb. 27.
Traders said bond market players are growing nervous ahead of Friday’s government report on February employment. If the economy created more jobs than expected in February, it could be a strong sign that business activity is rebounding--possibly precluding any more interest rate cuts by the Federal Reserve Board.
“Expectations for a rate cut are decreasing,” said Anthony Conroy, director of equity trading at BT Global Asset Management.
The Fed meets March 26.
In any case, the stock market has been taking the bond market’s gloominess largely in stride in recent weeks, with many stocks continuing to advance. On Wednesday some smaller-stock indexes, including the Russell 2,000 index, hit record highs despite the Dow’s loss.
Some analysts say that optimism about a stronger economy--and better corporate earnings--could continue to buoy many stocks even if bond yields edge higher.
Indeed, small investors continue to pour cash into stock mutual funds: The Investment Company Institute, trade group for the funds, estimated Wednesday that the net new cash flow into stock funds was $21 billion in February, down from January’s record $28.9 billion but still the second-best month ever.
Among Wednesday’s market highlights:
* Semiconductor stocks were slammed again, after Texas Instruments became the latest computer chip firm to warn of slower growth this year, particularly in the memory-chip business.
Memory chip prices have plunged as computer demand has slowed and as the industry has found itself swamped with excess chip inventory.
TI shares slid 2 3/4 to 47 5/8, Micron Technology slumped 2 to 29 1/8, Intel fell 2 1/8 to 53 1/4, Motorola dropped 1 5/8 to 52 7/8 and LSI Logic sank 1 3/4 to 26.
* Some interest-sensitive stocks slid as bond yields rose. Federal National Mortgage sank 2 1/8 to 32 7/8 and Countrywide Credit lost 1 to 22.
* On the plus side, energy stocks rose with crude oil prices after the chief oil industry trade group said that U.S. crude stockpiles are at their lowest levels since the late-1970s. Exxon jumped 1 3/8 to 82 1/4, Unocal gained 7/8 to 30 1/2, Atlantic Richfield rose 1 7/8 to 113, Halliburton added 1 1/2 to 55 and Western Atlas gained 1 1/2 to 55 1/8.
* Many retail stocks continued their recent rebound. Mercantile Stores leaped 1 5/8 to 55 7/8, Circuit City added 1 1/4 to 32 1/2 and Tandy surged 1 3/4 to 44 5/8.
* Among other consumer issues, Mirage Resorts jumped 1 1/2 to 46 3/8 after detailing plans for a new $1.25-billion, Italian-themed Las Vegas resort to be called Bellagio.
Athletic-wear giant Nike soared 3 3/8 to 72 5/8 after brokerage Morgan Stanley upgraded the stock.
* Chantal slid 11/16 to 5 15/16. The Los Angeles-based anti-wrinkle cream maker is three weeks late in reporting its financial results, and the Nasdaq market has threatened to delist the shares.
* Among new issues, Newport Beach-based Data Processing Resources sold 2.64 million shares at 14 apiece, and the stock rocketed to close at 21 1/8 on Nasdaq. The company provides technology consultants to businesses.
