Uncertainty Keeps Stocks on a Seesaw
The stock market finished lower again Thursday as bond yields rose amid political jitters and uncertainty about next week’s key economic reports.
Elsewhere, the U.S. dollar ended mixed, while the Canadian dollar jumped after Canada’s central bank raised interest rates.
The Dow Jones industrial average closed down 35.73 points at 7,654.25, after it saw a 40-point morning gain, then a 96-point loss before recovering late in the day.
Most broader stock indexes also fell modestly, although losers had only a narrow edge over winners on the New York Stock Exchange.
The Dow has experienced swings of more than 100 points every day this week, as some investors have quickly dumped stocks on bad news or rumors, while others have rushed in once prices tumbled.
“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, strategist for Kemper Funds in Chicago, referring to major economic data on deck, the Federal Reserve Board meeting, ongoing rumors about Japanese sales of Treasury bonds and China’s takeover of Hong Kong.
The stock market’s immediate problem is bond yields: Analysts said stocks were jarred Thursday by the steady backup in long-term interest rates, which have risen for four straight days.
The bellwether 30-year Treasury bond ended at 6.78%, up from 6.73% on Wednesday and the highest since June 11. Shorter-term yields also rose.
Bonds were hurt Thursday when the Labor Department said the number of first-time claims for jobless benefits fell more than expected last week, in what some fear may be a foreshadowing of a strong June employment report. That report is due next Friday.
Before then, other important data should give a clearer picture of the economy’s recent trend. Currently, most economists believe that the Fed, which meets Tuesday and Wednesday, will leave short-term rates unchanged, on the assumption that the economy’s pace has indeed slowed.
For stocks, which have rocketed since mid-April, any data that suggests a continuing backup in bond yields could provoke much more profit-taking, analysts say.
What’s more, second-quarter corporate earnings reports will soon take center stage, and the numbers will need to be strong to support current stock prices.
Among Thursday’s highlights:
* Tech stocks were weak after Komag, a disk drive maker, became the latest tech firm to warn about a profit shortfall. Komag plunged 6 7/8 to 16 11/16.
Other losers included Intel, down 3 to 143 11/16; Dell Computer, down 2 3/8 to 119 1/4; and Read-Rite, down 2 1/8 to 20 1/16.
* Drug stocks pulled back after recent heady gains. Merck lost 1 1/16 to 101 3/4, Warner-Lambert dropped 2 3/4 to 119 and Johnson & Johnson fell 1 5/16 to 63 7/8.
* Among initial public offerings, shares of cigar retailer 800-JR Cigar rallied 2 7/8 to 19 7/8 on Nasdaq in their first day of trading.
In foreign trading, Toronto’s key stock index dropped about 1% after the Bank of Canada surprised traders by raising short-term interest rates for the first time in more than two years. The move was seen as an attempt to boost the Canadian dollar--and it worked.
Meanwhile, Mexico City stocks continued to rocket, with the Bolsa index rising 1.5% to 4,464.98; Hong Kong shares rose further ahead of next week’s takeover by China.
* SLOWER FLOWS
Stock fund inflows are down this month. D11
