Blue Chips Hit 3-Month Low; Dow Off 43.36
Blue-chip stocks were rocked by another wave of selling Tuesday that drove the Dow Jones industrial average to its lowest level in more than three months as investors shifted to Treasury bonds to take advantage of a jump in the longterm yield.
Treasury bond yields ended slightly higher amid weak investor demand for $19 billion in new three-year notes, the market’s first hurdle in a record government borrowing this week.
The Dow Jones industrial average fell 43.36 points to 5,420.95, flirting with its first close below 5,400 since early February.
The barometer of 30 big U.S. companies--now down more than 4.5% from its all-time high of 5,689.74 on April 3--has been struggling amid inflation worries and the persistent rise of bond yields.
Broader blue-chip measures were negative too. Declining issues outnumbered advancers by about 4 to 3 on the New York Stock Exchange, where volume totaled 406.72 million shares as of 4 p.m., up from Monday’s pace.
The NYSE’s composite index fell 1.41 to 343.33 and the Standard & Poor’s 500-stock index fell 2.55 to 638.26.
After treating investors to tremendous returns in 1995 and early 1996, the Dow and the S&P; 500 have been staggering higher and lower, prompting concerns that their stocks are overpriced compared with earnings growth.
The Nasdaq composite index lost ground again as technology shares slipped from some early gains.
Although they have failed to resume their rally since last Thursday’s broad sell-off, technology issues and other more speculative elements of the market continued to outperform the blue-chips on expectations those sectors have the most to gain in an improving economy.
“The action of the secondary averages continues to outperform the blue chips, and that’s what’s holding the market together,” Goldman said.
The Nasdaq fell 3.64 to 1,182.67 on record volume of 806.5 million shares--much of it from another day of roller-coaster trading in a tiny company’s stock.
The yield on the 30-year Treasury bond--benchmark for the rates charged on many types of loans--increased to 7.08% from 7.05% late Monday.
Demonstrating the spotty demand for the three-year notes, the bid-to-cover ratio--which compares the number of bids received to those accepted--was 2.03-to-1 vs. an average of 2.58-to-1 for the past 12 three-year auctions. The notes were sold at an average yield of 6.39%.
The weak results underscored concern among bond participants about the market’s ability to absorb the remainder of the total $46 billion in new government securities this year.
The refunding continues today with the sale of $14 billion in 10-year notes and concludes on Thursday when $13 billion in 36-day cash management bills will be auctioned.
Among the market highlights:
* Comparator Systems broke the one-day Nasdaq volume record for the third straight session on Tuesday. The fingerprint-verification company announced plans Monday to unveil some new applications, and the stock rose 75 cents, or 267%. On Tuesday, it fell 1/8 to 7/8, but only after jumping another 78% earlier in the session.
* Apple Computer advanced 1 1/4 at 26 7/8, rising for a second day after IBM announced an arrangement to use and resell the software that runs Apple’s Macintosh computer. IBM fell 1 1/8 to 105 7/8.
* Curtis Mathes Holding jumped 1 1/4 to 2 5/8 after the venerable name in American TV manufacturing said it would demonstrate by the end of the month a TV that has an Internet-ready computer inside.
* Zenith Electronics dropped 5 5/8 to 17 1/4 after nearly quadrupling in the week since the company announced plans to sell cable modems.
* Whittaker lost 4 1/4 at 18 5/8. The engineering company said late Monday it expects higher profits in its aerospace business for its second quarter, but a loss in its communications segment for the period, which ended April 30.
* Turner Broadcasting System Class B fell 3/4 at 25 7/8 on published reports that federal regulators may recommend blocking Time Warner’s proposed $7 billion acquisition of TBS. Time Warner eased 1/8 to 39 1/2.
* Cinergy added 7/8 at 28 7/8 and General Public Utilities gained 3/8 at 31 3/8. Midlands Electricity of Britain said it has agreed to be purchased for about $2.59 billion by a partnership between the two U.S. utilities.
Overseas, Tokyo’s Nikkei index lost 167.10 points to end at 21,495.28. It was the first time since April 8 that the Nikkei had closed below 21,500. London’s FTSE 100 closed 28.6 points lower at 3,723.0, a five-week low.
Wheat prices rose strongly as fresh fears about poor growing weather in the U.S. Plains and Midwest took hold of the market and renewed concerns about the lowest grain supplies in years.
The May wheat contract at the Chicago Board of Trade rose 22 cents a bushel to $6.49, buoyed by weekly state crop reports late on Monday confirming poor ratings for winter wheat and planting delays in North Dakota for spring wheat.
