Dow Off 33; Bond Yields Edge Lower
The Dow Jones industrial average slid again Tuesday, but the broad market was mixed, steadying from Monday’s sharp sell-off as investors braced for this week’s reports on inflation.
The Dow industrials shed 33.96 points to finish at 5,560.41. The widely watched barometer of big U.S. companies lost about 88 points Monday as stock investors reacted to another unexpectedly strong employment report on Good Friday that sent bond yields higher.
Meanwhile, the dollar climbed to a seven-month high against the German mark and also hit a 26-month high against the Japanese yen in overnight Asian trading.
Several other key indexes finished lower, but advancing issues outnumbered decliners on the New York Stock Exchange and the technology-heavy Nasdaq composite index rose after cushioning the market’s fall Monday.
Trading, while heavy, was quiet compared with Monday as investors awaited new readings on the economy, particularly Thursday’s and Friday’s reports on inflation in consumer and wholesale prices.
“There’s quite a bit of fear about what numbers might say,” said Bob Dickey, technical analyst for Dain Bosworth Inc. in Minneapolis. “It’s got the potential to be a pretty wild week yet.”
Although many analysts considered the economy too sluggish earlier this year, they’ve grown worried that the surge in new jobs will generate too much spending, which can lead to inflation. The Federal Reserve had been lowering interest rates since last summer to stimulate borrowing and spending, but is less inclined to keep easing credit if inflationary pressures emerge.
Advancers led decliners 7 to 5 on the NYSE, where volume totaled 421.19 million shares as of 4 p.m., slightly higher than Monday’s total.
The Standard & Poor’s 500-stock index fell 2.05 to 642.19. The Nasdaq index rose 3.49 to 1,109.15, although that was before news of a disappointing report on semiconductor chip orders.
Bond yields fell slightly after a two-day plunge on the March employment data that sent interest rates soaring. The yield on the benchmark 30-year Treasury bond edged lower Tuesday to about 6.83%--but still was well above Friday morning’s 6.62%
Stocks often fall when interest rates rise because higher borrowing costs hurt corporate profits and slow consumer spending, which accounts for two-thirds of the nation’s business activity.
“Everyone thought the February payroll figures were an aberration. Now they’re seeing a wake-up call [in the March data],” said Russ Labrasca, senior vice president at Sutro & Co. in San Francisco. “We’re also seeing some subtle reminders like rising commodity prices that could mean a little stronger inflation than was previously estimated.”
Among market highlights:
* Oil producers, which may benefit from the recent increase in crude prices, bucked the NYSE’s downward trend as investors sought a hedge against inflation. Mobil rose 1 1/4 to 117 5/8 and Amerada Hess rose 1 to 57 7/8. Despite the fall of the Dow industrials, components Exxon and Texaco finished unchanged at 83 3/8 and 87 1/8, respectively, and Chevron dipped 1/4 to 56 3/8.
* Among multinationals losing ground in part due to the stronger dollar were Dow components Boeing, off 3/4 to 82 1/8, IBM, off 1 1/4 to 118 1/8, Coca-Cola, off 3/8 to 81 7/8, and Procter & Gamble, off 1 5/8 to 83. Johnson & Johnson, which is not a Dow component, lost 7/8 to 91 1/4.
* B F Goodrich rose 1 7/8 to 41 3/8. Morgan Stanley upgraded the stock on recent price weakness.
* Oracle lost 1 3/4 to 41 1/2. Alex Brown and SoundView downgraded the stock. Analysts said the warp speed of growth in the database software industry may be slowing slightly after rival Informix Monday issued an earnings warning.
Informix rose 5/8 to 19 after Monday’s 7 1/8-point drop.
* HBO jumped 10 1/8 to 110 7/8 after reporting a jump in first-quarter earnings.
Overseas, Tokyo’s Nikkei stock average rose 1.5%, Frankfurt’s DAX index rose 0.3% and London’s FT-SE 100 gained 0.1%.
Oil prices edged higher Tuesday as traders nervously monitored Iraq’s talks with the U.N. in New York over limited oil sales by Baghdad. The negotiations center on details of implementing a U.N. resolution that would allow Iraq to sell up to $2 billion worth of oil over six months.
Crude oil for May delivery rose 3 cents to $23.06 a barrel at the New York Mercantile Exchange.
The strong oil prices boosted the Goldman Sachs Commodity Index, which is heavily weighted toward the energy sector, 0.22 to 214.27.
The Knight Ridder index of commodity futures, which rose to a 7 1/2-year high Monday, fell back slightly, however, and ended down 1.14 at 255.82.
The fall partly reflected a modest setback in corn prices on the Chicago Board of Trade, after an all-time high price had been paid for the May contract early in the day.
There was also news early Tuesday China had approved the export of 1.5 million metric tons of corn to South Korea and Japan. Analysts and government officials in Rio De Janeiro said high corn prices were encouraging exports by Brazil.
May corn rose to a high of $4.38 1/2 a bushel but ended 3/4 cent lower at $4.35 a bushel at the Chicago Board of Trade.May wheat rose 4 1/2 cents to $5.29 3/4 a bushel.
