Stocks Slide, But Pull Up From Lows

U.S. stock prices tumbled on cue Monday after investors spent a long weekend stewing over another unexpected surge in new jobs and then launched a sell-off at the opening bell.

But prices rallied late in the day, led by smaller stocks and technology shares.

The Dow Jones industrial average closed off 88.51 points, or 1.6%, at 5,594.37, after having fallen as much as 140.54 points in the market’s early going.

In the broad market losers swamped winners 24 to 3 on the New York Stock Exchange. But trading volume was moderate at 422 million shares.

Share prices fell as bond yields jumped Monday, with the 30-year Treasury bond yield closing at a seven-month high of 6.87%, up from 6.82% last Friday and 6.67% last Thursday.

“The market is suffering the slings and arrows of improving job numbers,” said Alan R. Ackerman, senior vice president of Fahnestock & Co., a New York brokerage firm.

Such a comment might defy logic, but, as investors have learned lately, signs of an improving economy trigger worries about higher interest rates. That translates into bad news for bonds, hurting stocks in turn.

Any suggestion that economic growth is becoming too heated has tended to create enormous volatility in the markets. The report from Friday, when U.S. stock exchanges were closed, showed that the nation added 140,000 jobs in March, despite a 17-day strike that furloughed thousands of General Motors Corp. workers.

The gain was far above what many economists had expected and once again raised the specter that the Federal Reserve Board, which has been easing credit since last July, might be edging closer to the day when it will have to tighten credit again to keep the economy from overheating.

A month ago, the Dow average lost 171 points, its third-worst point drop ever, on news of exceptional job growth in February. That increase was revised downward slightly on Friday, but the report still showed a stunning increase of 624,000. Much of that Dow loss was made up in ensuing days and, in fact, the average set a record high last Wednesday of 5,689.74. The index is up 9.3% so far this year.

The stocks of bank, credit, mortgage and utility companies, particularly sensitive to rising rates, led the slump Monday. But after an ominous start, many stocks, particularly in the high-tech sector, rallied a bit, shaving some of the day’s biggest declines.

The markets’ recent extreme volatility spotlights the hair-raising, sometimes counterintuitive nature of investing. Mom-and-pop investors might view a strengthening economy as fine news, with the prospect that more money in people’s pockets means more purchases of goods and services and, therefore, boosts in corporate profits. Wall Street, on the other hand, sees it as troubling.

“The problem with the market is, you’ve got to get it just right,” said Hugh Johnson, market strategist for First Albany Corp., an investment firm. “It has to be a Goldilocks economy, not too hot or too cold.”

With rates on so-called jumbo and superjumbo home loans already approaching 9%, home sales could be hurt, said Alex Glasscock, president of Brodon Mortgage in Santa Monica.

While stocks fell, gold and other commodities rose Monday. Corn prices surged to new all-time highs on shrinking supplies, gold rose above $400 an ounce and higher oil prices helped lift the Commodity Research Bureau index of 17 commodities to a 7 1/2-year high. The index ended up 2.24 points at 256.96.

In the bond market, the Treasury sold $18.25 billion of two-year notes, but demand was tepid in the face of the employment news.

The notes were sold at an average yield of 6.14%.

The Treasury will sell five-year notes today.

Among Monday’s highlights:

* Among the worst-hit industries Monday were financial stocks, which would be the first to see damage to earnings as they paid more for borrowed money. Federal National Mortgage Assn. slumped 1 to 32 7/8, American Express fell 1 3/4 to 48 7/8 and Federal Home Loan Mortgage Corp. slid 2 to 87 1/8.

Among banks, Chase Manhattan skidded 2 3/4 to 70 5/8, BankAmerica fell 2 3/4 to 76, Citicorp lost 1 1/2 to 79 3/8, Wells Fargo tumbled 7 1/8 to 252 and SunTrust Banks declined 2 7/8 to 69 1/2.

* Brokerage firms and investment banks dropped on expectations their profits will decline if individual investors fear to trade. Dean Witter Discover fell 3 1/4 to 55 1/4, Travelers Group, parent of Smith Barney, lost 3 3/8 to 62 1/2 and Merrill Lynch dropped 3 1/8 to 58 1/2.

* Electric utility stocks, which rely on borrowed capital for much of their financing, saw their biggest one-day decline since May 1994. Standard & Poor’s electric companies index crumbled 2.11 points, or 2.7%, to 75.73. Southern fell 7/8 to 23 1/2, Duke Power slipped 1 1/2 to 48 and Consolidated Edison of New York dropped 1 1/8 to 30 5/8.

* Some cyclical issues benefited from the jobs report. For example, Dow component Alcoa rose 1 1/4 to 63 1/4. The aluminum miner and processor said first-quarter income was $1.01 a share, down from $1.08 a year ago. Bethlehem Steel, also a Dow component, rose 1/4 to 13 3/4. Birmingham Steel rose 1 to 15 5/8.

* Although the technology-laden Nasdaq fell, many major stocks were up, including IBM, up 1 7/8 to 199 3/8, Micron Technology, up 2 5/8 to 33 5/8, Texas Instruments, up 1 3/4 to 52 5/8 and Intel, up 1 3/8 to 60 5/8.

* Abbott Labs rose 1 1/8 to 43 1/8 after a strong earnings report for the first quarter. Warner Lambert added 3 1/2 to 113 7/8, defying weakness in the drug sector. Morgan Stanley upgraded the stock, market sources said.

In foreign markets, Tokyo stocks fell in anticipation of the rout on Wall Street, with the Nikkei index losing 1.25%. But the FTSE 100 index in London and the DAX index in Frankfurt ended firmer.

Times wire services contributed to this report.

Market Roundup, D7