Blue Chips Snap 5-Session Slide; Bond Yields Ease
The Dow Jones industrial average snapped a five-session losing streak Monday with a small gain, but most stocks ended lower in very light trading.
In other markets, bond yields eased for a third straight session, oil shot up, and copper prices stabilized after Friday’s plunge related to a huge trading scandal.
On Wall Street, the Dow index added 3.33 points to 5,652.78 after slipping 47.66 points last week.
However, most broader indexes dropped again, with the Nasdaq index of mostly smaller stocks falling 5.54 points to 1,207.64. It now has declined 3.3% from its recent record high, pressured by weakness in some technology stocks on concerns about second-quarter earnings growth.
That weakness continued Monday, as analysts trimmed earnings estimates or downgraded ratings on some semiconductor stocks, including International Rectifier, which tumbled 1 7/8 to 19 1/4, and Cyrix, which slid 2 1/16 to 23 1/2.
But with two weeks left in the second quarter, investors overall aren’t showing any great concern about corporate earnings. Indeed, despite the decline in the market last week, trading volume has been below-average.
On Monday, New York Stock Exchange volume was 298 million shares, the slowest yet this year. Nasdaq volume also shrank. Losers topped winners by 12 to 11 on the NYSE and by 21 to 17 on Nasdaq.
A midafternoon rally in bonds helped the Dow recover from minor morning losses. The 30-year Treasury bond yield closed at 7.06%, down from 7.08% on Friday. The yield has dropped from a 13-month high of 7.19% reached last Wednesday.
Bond investors early last week were again spooked by fears that the U.S. economy’s strength will compel the Federal Reserve Board to raise short-term interest rates, perhaps as soon as the board’s July 2 meeting. But those concerns have waned in recent days.
“I’m still not so certain that the Fed needs to” raise rates, said David Capurro, who manages $500 million in bonds at Franklin Resources in San Mateo, Calif.
Some analysts say the surge in bond yields since February is already weighing on the economy, doing the Fed’s work for it. On Monday, the National Assn. of Homebuilders said its index of housing market conditions fell to 61 in June from 63 in May, the first decline since February.
Bond traders looked askance Monday at another jump in crude oil prices. July crude futures on the New York Merc soared $1.80 to $22.14 a barrel as traders bet that Iraq’s weekend snubbing of U.N. weapons inspectors will keep its oil off world markets.
Among Monday’s highlights:
* Tech shares losing ground included Intel, off 1 to 72; FileNet, off 2 7/8 to 37 7/8; Seagate, down 2 to 45 7/8; and Peoplesoft, down 4 1/4 to 66. Also, Lattice Semiconductor eased 1/2 to 34 1/4. After the market closed, the firm warned that sales in the current quarter will be 8% to 10% below the previous quarter’s.
But Microsoft rose 1 5/8 to 124 5/8 after the software giant backed analysts’ earnings projections.
* Some energy stocks rallied with crude prices. Exxon added 1 to 84 1/2, Atlantic Richfield gained 1 5/8 to 119 and Benton Oil & Gas was up 3/4 to 18 5/8.
* Some gambling stocks were strong. Hilton Hotels soared 4 1/2 to 118 3/8, Circus Circus gained 1 1/2 to 42 and MGM Grand rose 1/2 to 46 3/8.
* Coastcast tumbled 2 5/8 to 23 3/8 after brokerage Seidler Cos. lowered its rating on the golf-club-head maker, citing increased supply concerns.
* Penril DataComm leaped 3 5/8 to 13 5/8 after Bay Networks said it would acquire Penril’s digital signal-processing modem business. After the sale, Penril will spin off its remaining telecommunications-equipment business into a new company, Access Beyond.
In commodities markets, copper prices eked out small gains after last week’s plunge. As investigators widened their probe into how Sumitomo trader Yasuo Hamanaka hid his huge losses for so long, financial market officials said they believed the worst of Sumitomo’s copper losses had been recognized.
Market Roundup, D8
