Bond Yields at 4-Year Low; Techs Slide Again
Bond prices soared, bringing interest rates to their lowest level in more than four years, and Wall Street stocks closed slightly lower Friday after a reported drop in producer prices dashed inflation fears.
The dollar rose broadly against German and Japanese currencies as investors remained skeptical about Japan’s economic stimulus plan and a German official said weak Asian markets will affect Europe.
The Dow Jones industrial average initially rose, but then resumed its downward spiral for a fifth straight day as investors worried about a potential profit squeeze on U.S. corporations as a result of Asia’s financial woes.
The Dow ended off 10.69 points, or 0.14%, at 7,838.30. For the week, it shed 311 points, or 3.81%.
In the broader market, advancers were even with decliners in heavy trading on the New York Stock Exchange.
Investors continued to bruise high-technology stocks amid fears that the companies’ sales and earnings are particularly vulnerable to a slowdown in Asian economies.
“Until we get some clarification of exactly what is going on in Asia . . . the market’s going to be nervous,” said Peter Coolidge, senior equity trader at Brean Murray & Co.
Nevertheless, some market players said they were troubled by the inability of Wall Street to mount a rally on a day when global markets were stable and the 30-year Treasury bond’s yield ended at its lowest level since October 1993.
Bond prices soared on a report of lower U.S. producer prices, which built on an ongoing flight-to-quality flow of investment money into more stable U.S. financial markets.
The bellwether 30-year bond shot up more than a full point, as the yield, which moves in the opposite direction, plummeted to 5.92% from Thursday’s close of 5.99%. The yield reached an all-time low of 5.75% on Oct. 13, 1993.
The Labor Department’s report of a surprising decline in wholesale costs for energy and other goods in November quashed inflation fears. The producer price index fell 0.2% last month and has fallen by 1.2% for the first 11 months of 1997, at a seasonally adjusted rate, compared with a 2.8% rise during all of 1996.
Analysts predicted that Federal Reserve Board policymakers will keep interest rates steady at their strategy session Tuesday, relying on a rising tide of imports to curb growth next year and an appreciating dollar to keep prices in check.
Among Friday’s highlights:
* The weeklong decline in technology stocks continued. Intel fell $1.31 to $70.50, IBM dropped $1.25 to $100.38 and Texas Instruments lost $1.25 to $40.88.
Microsoft fell $2.31 to $136.75 after it was ordered to stop forcing computer makers to install its Internet Explorer browser program. Rival Netscape Communications rose $1.63 to $27.88.
Electronics for Imaging plunged $24.13, or 62%, to $14.88, after the company said fourth-quarter earnings will fall below analysts’ forecasts because big Japanese customers are delaying purchases.
Cisco Systems dropped $6.13 to $76.56 on concerns about rising inventory.
In currency markets, the dollar ended the week higher against the German mark and the Japanese yen.
“There is no strong demand for marks, apart from buying them as a safe haven, and that is waning,” said Mike Malpede, senior currency analyst at Refco Group Ltd., explaining why demand for marks ebbed on news that German Finance Minister Theo Waigel will visit Washington next week to discuss Asia.
The dollar stood at 1.7745 marks after ending at 1.7600 on Thursday.
Investors sold Japanese yen, worried that Japan’s planned economic stimulus package would not do enough to restore confidence in the nation’s financial system.
The dollar closed at 130.45 yen, compared with 129.75 yen Thursday.
On overseas exchanges, London’s FTSE-100 closed up 0.18% and Tokyo’s 225-stock Nikkei average closed 0.91%.
Market Roundup, D4
