Stocks Close Mixed as Bond Yields Tumble
The stock market mustered a mixed close in continued slow trading volume Monday, unable to generate much excitement about a drop in bond yields.
The Dow industrial average added 7.22 points to 5,643.86, but most other stock indexes closed lower and Big Board losers narrowly outnumbered winners.
NYSE volume was inexplicably low for a third straight session, at just 337 million shares.
Analysts noted that investors’ “sector rotation” mentality continued Monday, as they dumped certain broad stock groups--including technology and railroads--in favor of others, notably banks and energy issues.
The market has been characterized in recent weeks by rapid movement of money from one stock group to another, as investors search for profitable themes.
On Monday, tech stocks were hammered on renewed fears of slowing earnings growth, as personal computer demand weakens.
The selling in the tech sector dragged the Nasdaq composite index of mostly smaller stocks down 15.13 points, or 1.4%, to 1,087.09.
Rail stocks also fell on earnings concerns.
But bank stocks gained as interest rates fell, and energy issues were strong as crude oil and gasoline prices jumped again because of tight supply conditions.
Meanwhile, the bond market staged a surprising rally ahead of today’s Federal Reserve Board meeting. The 30-year Treasury bond yield dropped from 6.64% Friday to 6.58%, its lowest level since March 7--which was one day before the government reported a stunning rise in job creation in February, sending yields soaring on fears that the economy was rebounding powerfully.
On Monday, bond traders said the market was pleased with a report that sales of previously owned homes nationwide rose 6.5% in February. Despite the apparent strength, some traders said a closer look at the report doesn’t suggest a truly robust housing market.
Even though the Fed is expected to leave short-term interest rates unchanged today, many investors still believe that the economy will be weak enough this spring to justify another Fed rate cut later.
One investor who says bond yields aren’t likely to rise much more this year is George Soros, the billionaire financier who runs Soros Fund Management.
“My guess is that the upward correction in interest rates has probably largely run its course,” Soros said at a press conference in Buenos Aires.
The bond market’s rally also may have gotten a push from the Treasury’s announcement that it will postpone this week’s planned auctions of two-year and five-year notes because Congress has not yet raised the federal debt ceiling.
Among Monday’s highlights:
* Tech issues slumping again included IBM, down 5 1/2 TO 108 3/4; FileNet, off 3 to 57; Intel, down 1 15/64 to 54 57/64; Digital Equipment, off 2 1/4 to 52 1/8; and Quarterdeck, down 1 15/16 to 12.
* The Dow Jones transportation index lost 27.05 points, or 1.2%, to 2,170.62, led lower by rail issues after Wisconsin Central warned that first-quarter results will be below year-ago results. It said bad weather was partly to blame for slowing traffic. Wisconsin lost 3 3/4 to 67 1/4, Conrail fell 2 3/4 to 72 and Burlington Northern Santa Fe lost 2 1/2 to 82 1/2.
* On the plus side, winners among bank stocks included Wells Fargo, up 3 3/8 to 251 7/8, Norwest, up 1 to 36 1/4; SunTrust, up 1 1/8 to 72 1/2; and J.P. Morgan, up 1 to 84 5/8.
* Rising energy stocks included Exxon, up 2 1/4 to 83 5/8; Atlantic Richfield, up 1 3/4 to 116 1/4; and Texaco, up 2 5/8 to 87 3/8.
Overseas, Tokyo’s Nikkei-225 stock average climbed 1% after a victory of the ruling coalition in local parliamentary elections Sunday boosted hopes that Japan’s political turmoil is stabilizing.
In Frankfurt, German stocks edged up to record highs after bond yields plunged, as state elections brought stability to the government and regional consumer price reports supported the outlook for restrained inflation.
Market Roundup, D8
