Uncertainty Keeps Stocks on a Seesaw
The stock market finished lower Thursday as interest rates rose amid uncertainty about next week’s key economic developments.
The dollar ended mixed, and oil prices fell. Gold edged higher.
The Dow Jones industrial average closed down just 35.73 points at 7,654.25, but that was after it saw a 40-point morning gain, then a 96-point loss before recovering over the final hour.
The barometer of blue-chip stocks has experienced swings of more than 100 points every day this week, as investors have sold at the first sign of trouble, then bought back in as soon as prices started to look enticing.
“There’s a lot of nervous money in the market because investors can’t quantify what’s going to happen next week,” said Robert Froehlich, chief investment strategist for Kemper Funds in Chicago, referring to major economic news expected and to political factors such as the impending Chinese takeover of Hong Kong.
Analysts said stocks were jarred by the steady rise in long-term interest rates, which have risen for four straight days and which rose again on Thursday when the Labor Department reported that the number of first-time claims for jobless benefits fell more than expected last week in what some fear may be a foreshadowing of next week’s report on monthly payroll and wage figures.
Wall Street was also on edge--as is traditional--ahead of the meeting next week of Federal Reserve Board rate-policy makers. Most economists expect the central bank to hold short-term interest rates steady.
The yield on the benchmark 30-year Treasury rose to 6.78% from 6.73% on Wednesday.
“Yields have backed up here above 6.77%. A combination of that plus portfolio juggling and many feel we’ve had a monstrous run and stocks need to consolidate,” said Scott Bleier, chief investment strategist at Prime Charter Ltd.
Broader stock measures also pulled back.
Declining issues outnumbered advancers by a 10-9 margin on the New York Stock Exchange in heavy trading. The Standard & Poor’s 500-stock index fell 5.31 points to 883.68, and the NYSE composite index fell 1.97 points to 460.93. The Nasdaq composite index fell 9.86 points to 1,436.38.
“People are nervous as cats out there, and they are doing some selling to nail down profits,” said Marshall Acuff, chief investment strategist for Smith Barney.
Among Thursday’s highlights:
* Once again, the damage was spread across a wide variety of sectors. The Dow’s biggest decliners included IBM, down 1 1/4 to 90 5/8; Caterpillar, down 1 1/2 to 105 5/8; and Boeing, down 1 to 53 3/4.
* Drug stocks, which had been the second best-performing sector in the S&P; 500 behind trucking, paced stocks’ decline. Johnson & Johnson fell 1 5/16 to 63 7/8, Merck was off 1 1/16 at 101 3/4, Eli Lilly dropped 1 5/16 to 107 15/16 and Schering-Plough fell 1 to 48 5/16.
* Warnings of lower profit from technology company Komag cooled the demand for tech issues. Komag plunged 6 7/8 to 16 11/16.
Hutchinson Technology fell 1 1/2 to 24 13/16, and Read-Rite slipped 2 1/8 to 20 1/16. Intel fell 3 to 143 11/16 and Cisco Systems dropped 1 1/8 to 67
* Among initial public offerings, shares of cigar retailer 800-JR Cigar rallied 2 7/8 to 19 7/8 in their first day of trading.
Oil prices fell as traders grew skeptical that the Organization of Petroleum Exporting Countries would be able to rein in overproduction after its members pledged to do so.
Crude oil for August delivery fell 43 cents to $19.09 a barrel at the New York Mercantile Exchange.
