Dow Off 92, Yields Soar on Economic Data

Blue-chip stocks fell sharply Thursday as long-term bond interest rates shot up after a series of surprisingly strong economic reports.

The Dow Jones industrial average lost 92.75 points Thursday to close at 6,927.38. But analysts said the market’s run to a high of 7,067 on Tuesday was overdone and that the recent drop was a short-term setback.

“It’s a timeout, not a top-out,” said Alfred E. Goldman, vice president at A.G. Edwards & Sons Inc. in St. Louis.

The dollar fell sharply against the Japanese yen Thursday, hurting bond prices.

A weak dollar signals foreign investors might be pulling out of their U.S. holdings, like stocks. Bond prices were also hurt by new economic data that raise worries about inflation.

The Labor Department reported that new claims for jobless benefits edged up by 1,000 last week, a much smaller advance than the 11,000 increase that many analysts had expected. It suggested that jobs are being created at a robust pace, and it fanned inflation concerns in the bond market.

A fast-paced economy can lead to higher interest rates, which can also hurt stocks by slowing consumer spending and raising corporate borrowing costs.

In addition, the Commerce Department said construction of new homes and apartments totaled 1.35 million at a seasonally adjusted annual rate in January, a 2.0% increase from December but well below the 1.4-million rate that many analysts had expected.

And the Federal Reserve Bank of Philadelphia said its regional economic index rose in February, as did its index of prices paid to manufacturers.

The price of the benchmark 30-year Treasury bond fell nearly a full point, driving its yield up to 6.65% from 6.58% on Wednesday. It was the largest jump in yields since Jan. 10.

In the stock market, technology and financial stocks met with some of the stiffest selling, with the latter under extra pressure from bonds’ decline. As a result, the technology-laden Nasdaq composite index fell 18.18 points to 1,347.40.

On the New York Stock Exchange, declining issues outnumbered advancers by 2 to 1.

The Standard & Poor’s 500-stock index was down 9.69 points at 802.80, while the NYSE composite index fell 4.48 points to 421.09.

Still, investors said the market was not being swayed by the new data.

“There’s a lot of information coming out, but there’s not a strong pattern that would be moving the market in either direction,” said Mary Farrell, investment strategist at PaineWebber Inc.

Among Thursday’s highlights:

* The hardest-hit technology issues included Intel, down 4 to 149 7/8 after Compaq Computer chose a Cyrix microprocessor to run its new $999 personal computer. Cyrix rose 3 7/8 to 29 3/8 and Compaq lost 2 3/4 to 82 5/8.

IBM fell 2 5/8 to 141 and Microsoft lost 2 7/8 1/4 to 95 1/4.

* Brokerage stocks, which are seen as a bellwether for the broader market, tumbled. Merrill Lynch lost 3 5/8 to 98 3/8, Morgan Stanley Group fell 2 to 69 7/8, PaineWebber dropped 2 to 3 7/8 and Bear Stearns lost 1 1/4 to 31.

* Several banks, whose profits are tied more closely to interest rates than most companies, fell. Citicorp lost 4 1/8 to 120 7/8, BankAmerica lost 3 1/8 to 117 3/4 and Bankers Trust New York fell 1 5/8 to 92 7/8.

* A number of food companies bucked the downtrend. Conagra rose 1 to 54 1/4, General Mills jumped 1 to 67 5/8 and Campbell Soup rose 1/2 to 89.

The dollar, which has been flying higher for the last year, fell on signs of economic strength in Europe and more verbal attempts by German central bank officials to tame its recent strength.

The dollar fell to its lowest level since Feb. 10 against the Japanese yen, settling at 122.55 yen in New York, down from 124.46 on Wednesday.

In overseas markets, Tokyo’s Nikkei stock average rose 2.4%. In afternoon trading, Frankfurt’s DAX index ended up 1.2% and London’s FTSE-100 was down 1.3%.