Stocks, Bonds Yo-Yo Before Ending Lower
Stocks took another roller-coaster ride Wednesday, flirting with new highs only to take another plunge, as did bonds.
The Dow Jones industrial average, which lost nearly 200 points on Monday and then gained more than 150 on Tuesday, oscillated from a 54-point gain to a 129-point loss before closing at 7,689.98, down 68.08.
Broader stock measures also gyrated through the heavily traded session, turning sharply lower in the afternoon as interest rates began to climb in the bond market. Monday’s sell-off was also fueled by a small jump in interest rates in the bond market.
“The market has just been an automatic yo-yo since Monday,” said Robert Stovall, president of Stovall/Twenty-First Advisers. “The traders have twitchy trigger fingers, and they’re ready and willing to sell whenever some news or rumors come along.”
The morning featured conflicting signals on the economy, with the government reporting that orders for big-ticket manufactured items declined in May and a real estate group reporting that sales of existing homes jumped to nearly a record level.
But because the stock market is already trading at record levels, agreeable news such as the durable-goods report can easily be overshadowed by any unsettling indicators, said Ned Riley, chief investment officer at Bank of Boston.
Further aggravating the Treasury market’s jitters was news that OPEC ministers had agreed to stop cheating on oil production quotas, which has helped keep oil prices--and inflation--in check.
Wall Street’s concern about the impact of higher oil prices was reflected in the inflation-sensitive bond market, where the 30-year Treasury fell, raising its yield to 6.73% from 6.69% on Tuesday.
Declining issues outnumbered advancers by a 6-5 margin on the New York Stock Exchange in very heavy trading. The Standard & Poor’s 500-stock list fell 7.35 points to 888.99, and the NYSE’s composite index fell 3.27 points to 462.90.
The Nasdaq composite index, which had closed at a record high Tuesday, fell 6.19 points to 1,446.24.
Analysts said comments by Treasury Secretary Robert Rubin on Wednesday did not calm the markets, which were rocked Monday after a remark by Japanese Prime Minister Ryutaro Hashimoto sparked fears that Japan might sell some of its large holdings of U.S. bonds. Rubin said there was no reason to expect such sales and that the market could absorb them if they occurred.
Among Wednesday’s highlights:
* The day’s selling wasn’t focused on any one group. The Dow’s biggest decliners included American Express, down 1 11/16 to 75 1/2; Exxon, down 1 9/16 to 60 15/16; Procter & Gamble, down 1 1/2 to 136 1/8; and Caterpillar, down 1 1/4 to 107 1/8.
* The day’s biggest loser was Liposome, which tumbled 15 1/4 to 9 9/16 after it said a trial of its Ventus respiratory drug found patients on a placebo did just as well.
* As debate heats up about the controversial settlement between tobacco companies and state prosecutors, Philip Morris slid 1 to 43 3/16, RJR Nabisco Holdings fell 1 to 33 3/8 and UST dropped 3/8 to 28 3/8.
* Paper issues fell on concern that prices for pulp will slide this summer and hurt profits. Georgia-Pacific slid 2 7/16 to 87 3/4, Buckeye Cellulose slid 1 7/8 to 34, International Paper slipped 3/4 to 50 1/8 and Westvaco slid 5/8 to 32 1/16.
Overseas, Tokyo’s Nikkei stock average rose 1.7%, Frankfurt’s DAX index rose 1.1% and London’s FTSE-100 rose 1.0%.
In currency trading in New York, the dollar fell to 113.83 Japanese yen from 114.82 on Tuesday.
