Blue Chips Up; Broad Market Finishes Mixed
The Dow Jones industrial average edged to its second straight record high, but most stock measures drifted lower Tuesday as bond yields rose again.
In late trading, the Dow crossed the 7,100 mark for the first time, but it surrendered a nearly 33-point afternoon gain to close at 7,085.16, up 5.77 points.
In the broad market, winners had a 13-12 edge over losers on the New York Stock Exchange, while losers topped winners by 20 to 19 on Nasdaq.
The Nasdaq composite stock index eased 5.96 points to 1,316.76.
Fresh signs of robust economic growth triggered new concern among investors that the Federal Reserve Board may raise interest rates later this month to head off inflationary pressures.
The government on Tuesday reported that wholesale inventories of goods jumped sharply in January, suggesting that manufacturers boosted production in anticipation of economic strength.
That news helped push bond yields higher. The bellwether 30-year Treasury bond yield rose as high as 6.86% before settling at 6.85%, up from Monday’s 6.81%.
Yields have been seesawing in the same general range for about two weeks. Still, there is concern that more signs of strong economic growth could push the T-bond yield over 7%.
“Higher yields are starting to bite into stocks,” said David Rolfe, chief investment officer at Wedgewood Partners Inc., which manages $75 million. “A 7% yield and a 7,000 Dow don’t mix.”
Rising yields make bonds more attractive relative to stocks, potentially siphoning money away from the market.
Still, many investors don’t believe the Fed will tighten credit any time soon. “The market is very divided on the outlook for interest rate policy,” said Charles White, managing director at Avatar Associates. “Right now there’s no compelling evidence to drive us in either direction.”
Among Tuesday’s highlights:
* The Dow was lifted by Boeing, up 2 to 108 1/8; Procter & Gamble, up 1 3/4 to 126 1/2; Philip Morris, up 7/8 to 139 5/8; and Alcoa, up 1 1/8 to 76.
* Several technology issues initially extended Monday’s rally, but most pulled lower by the close. IBM was up as much as 3 5/8 but finished down 1/8 at 146. Intel fell 7/8 to 143 7/8 and Microsoft lost 1 5/8 to 98 3/8.
* Rising bond yields caused a number of banking issues to decline, including Chase Manhattan, off 3 3/8 to 106 1/4; BankAmerica, down 3 5/8 to 119 3/8; NationsBank, off 1 1/4 to 63 3/4; and Citicorp, down 1 3/4 to 124 5/8.
* Utility stocks also continued to sink on interest rate worries. The Dow utility stock index fell 1.40 points to 225.12, the lowest since October.
* Among the day’s most active stocks was Nike, which finished off 5/8 at 66 3/8 after trading as low as 63. The stock was hit in early trading by speculation that Woolworth’s Foot Locker chain had cut shoe orders. Woolworth denied the rumor, and Nike shares battled back. Woolworth advanced 7/8 to 22 3/8.
* Announcements warning of disappointing corporate earnings hurt U.S. Surgical, which sank 4 to 39 1/4, and Wyle Electronics, which tumbled 5 to 33 3/8. After the market closed, office products company Day Runner also warned of weaker earnings in the current quarter because of one-time charges. In regular trading, the stock was off 1/4 to 25 3/4.
* Retail stocks were among the stronger groups, as fresh data pointed to healthy consumer spending so far this year. J.C. Penney rose 1 3/4 to 50 3/4, Federated Department Stores added 1 1/8 to 37 and Dayton Hudson was up 1 1/2 to 42 5/8.
* One day after the government moved to block its merger with office retailer Staples on antitrust grounds, Office Depot gained 2 1/4 to 19 3/8 on reports that Staples resumed negotiations to sell some stores to rival OfficeMax in order to win approval. Staples was unchanged at 23 1/4, and OfficeMax was unchanged at 13 1/4.
