Stocks Slip on Fears of Bond Upheaval
Stocks drifted lower Thursday as investors, concerned that the finish of this week’s big Treasury auction might jar the bond market, hung to the sidelines and locked in profits on the last week’s gains.
The Dow Jones industrial average slipped 5.18 points to 5,713.49. It recovered from an earlier loss of 33 points as the bond market held firm to most of the last week’s gains and kept long-term interest rates well below 7%.
“The stock market has been waiting for the auction to get out of the way and make sure there are no disasters,” said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee.
Broad stock measures were mostly lower but hung near opening levels for the fourth-straight session. Speculative sectors outperformed the blue-chip and larger-company measures that have rebounded more fully from July.
Bonds had edged lower by early afternoon amid the usual jitters about the market’s ability to absorb a big new supply of bonds from the federal government’s periodic debt refinancing.
As bond prices fell, the yield on existing 30-year Treasuries--a key influence on corporate and consumer borrowing costs--edged higher. But after the auction of $10 billion in new 30-year Treasuries, the final phase of the quarterly refunding, bonds cut their losses, leaving the yield on the long-bond little changed--at 6.78% compared with 6.77% on Wednesday.
“They’ve been saying all week that the auctions haven’t gone real well, but the bond market really acted terrific despite the rhetoric of the last three days,” said Berman.
Despite the sigh of relief in the bond market, stock investors were inclined to wait for Friday morning’s report on wholesale inflation before buying equities more aggressively, Berman said.
Declining issues barely outnumbered advancers on the New York Stock Exchange, where volume was light, totaling 334.55 million shares as of 4 p.m., down sharply from the previous session.
The NYSE’s composite index fell 0.52 point to 353.91, and the Standard & Poor’s 500 stock index fell 1.57 points to 662.59. But the American Stock Exchange’s market value index, dominated by smaller companies, rose 1.53 to 551.77.
The technology-laden Nasdaq composite index fell 3.60 points to 1,137.51 as several computer-related shares gave back some of Wednesday’s market-leading rally and semiconductor stocks retreated in advance of Thursday evening’s report on July orders. Intel fell 1 39/64 to 80 3/4 and Applied Materials fell 1 5/8 to 26 1/8.
Investors are hoping the producer price report will reinforce last week’s indications of a moderating economy and modest inflation, which helped boost several indexes back near record levels less than a month after July’s sharp pullback.
There was little reaction Thursday morning’s report that first-time claims for jobless benefits shot up by 24,000 last week to 318,000. It was the first advance in four weeks, but the increase was not as big as expected and the volatile weekly report holds far less sway than the monthly tally.
Among market highlights:
* P&G; lost 2 7/8 to 87 7/8. The consumer products giant’s earnings topped Wall Street expectations, but quarterly sales rose a modest 1% as dollar sales were affected by pricing pressures in North America and Europe.
* Nokia surged 3 1/8 to 39 7/8 in U.S. trading after the Finnish mobile phone maker showed a clear recovery in second-quarter results despite a weak overall first half.
* Motorola rose 1/2 to 57 3/4 as Lehman Brothers also reinstated coverage of the stock with a buy. Swedish telecoms group LM Ericsson rose 9/16 to 21-7/16 in U.S. trading.
* Guess ended at 18 in its Wall Street debut, flat with its offering price of $18. The retailer’s deal was scaled back to 7 million shares from its original filing of 9.2 million shares at a range of 21 to 23.
* AMR added 4 1/2 to 86 1/4 after news the parent of American Airlines planned to spin off less than 20% of its Sabre Group Holdings information technology subsidiary in an IPO slated for the fourth quarter of 1996.
* California Amplifier slumped 1 3/4 to 7 7/8 after warning it might post a slight loss in the second quarter.
* Roto-Rooter added 5 to 41 1/2 after Chemed said it was starting an $88 million, or $41-a-share tender offer for shares of the provider of sewer, drain and pipe cleaning services it does not already own. Chemed rose 1/8 to 38 1/8.
Overseas, Tokyo’s Nikkei stock average rose 1.2%, Frankfurt’s DAX index rose 0.2%, and London’s FTSE-100 ended slightly higher.
Market Roundup, D6
