Stocks Falter, Yields Rise on Job Data Jitters
Stocks turned mostly lower Thursday as bond yields shot up on worries about today’s report on February employment and more signs that the economy may be so robust as to pose a danger of accelerating inflation.
The Dow Jones industrial average fell 1.15 points to 6,944.70. The blue-chip barometer, which had finished up 93 points Wednesday, made a 42-point advance early in Thursday’s session, only to see it evaporate as the day wore on. It was saved from further declines as nervous investors clung to big companies considered less volatile.
But the strong economic news carried the dollar to a three-year high against the German mark.
The stock market’s cautious mood contrasted with that of Wednesday’s session, when investors’ fears were eased by Federal Reserve Board Chairman Alan Greenspan’s comments that the central bank was not planning some action to slow stock prices’ rise.
Heightening anxieties in advance of the employment report was Thursday’s news that orders to U.S. factories posted unexpectedly strong gains in January and that the number of first-time claims for jobless benefits plunged last week, pushing the four-week average to an eight-year low.
“The stock market is struggling to get a true sense of the strength of the economy and what will be the course of Fed policy,” said Charles White, managing director at Avatar Associates.
Many indicators of a rapidly expanding economy could cause the central bank to raise interest rates to prevent higher inflation. Higher rates slow business and consumer borrowing and spending, thus hurting stocks.
The yield on the benchmark 30-year Treasury bond rose to 6.88%, up from 6.82% on Wednesday.
Higher inflation also makes existing fixed-income investments such as bonds less attractive, forcing down prices to improve their yield.
On the New York Stock Exchange, advancing issues outnumbered decliners by a narrow margin in heavy trading.
The Standard & Poor’s 500-stock list fell 3.43 points to 798.56, and the NYSE composite index fell 0.43 point to 420.24. The technology-heavy Nasdaq composite index fell 13.66 points to 1,315.43.
Among Thursday’s highlights:
* The release of more data showing a strong economy had investors moving away from consumer-product issues--steady earners considered better bets amid signs of economic weakness. The Dow’s biggest decliners included Merck, down 1 3/4 to 92 1/4; Procter & Gamble, down 1 3/8 to 119; and Philip Morris, down 7/8 to 133 1/4.
* IBM rose 1 1/8 to 146 5/8, making it one of the Dow’s strongest issues, but most bellwether technology shares declined. Compaq Computer fell 3 1/2 to 77 1/2, Intel fell 4 1/8 to 145 3/8, Microsoft fell 3 1/8 to 97 3/4, Oracle fell 3 3/16 to 36 9/16, Texas Instruments fell 2 3/4 to 80 1/2 and Cisco Systems fell 2 1/4 to 54 5/8.
* Tempering the Dow’s loss were gains in oil issues, which rose on optimism that growing global energy demand will mean higher profits. Texaco climbed 2 1/8 to 103 7/8, and Chevron rose 1 1/8 to 66 1/2.
* Bank issues gained after Great Western Financial said it agreed to be acquired by Seattle-based Washington Mutual in a deal valued at nearly $6.6 billion. GW rose 1 7/8 to 46 7/8, and Washington Mutual fell 1/4 to 53. H.F. Ahmanson, whose hostile bid for GW was topped, lost 1 1/4 to 40 3/4.
Citicorp climbed 3/8 to 122 1/2, BankAmerica rose 1 7/8 to 118 3/4, Wells Fargo gained 3 1/4 to 312 1/2 and Bank of New York rose 3/4 to 40 5/8.
In currency trading in New York, the Mexican peso weakened against the U.S. dollar after a U.S. House of Representatives committee voted to revoke certification of Mexico as a U.S. ally in the fight to stem drug trafficking. The peso closed at 12.45 cents, down 0.2% from 12.48 cents at Wednesday’s close. Although the vote is only an initial step, traders were nervous because decertification would block certain loan guarantees and aid to the country. Coffee prices suffered a setback after their recent rapid advance, but soybean prices powered to their highest level in 5 1/2 months.
