Dow Edges Lower; Yields Fall
Stocks ended slightly lower Thursday after a volatile session, while bond yields fell after a highly successful 30-year Treasury bond auction.
The Dow Jones industrial average erased an early 52-point deficit and briefly moved higher, but it closed 9.33 points lower at 7,683.24, about 32 points shy of a full recovery from its 554-point plunge Oct. 27.
It was the second straight day that the Dow fell short of a complete rebound. On Wednesday, the blue chips gained just 3 points after surrendering most of a 76-point gain that would have easily repaired the remaining damage.
“I’m not surprised that the market’s resting here,” said Bill Barker, chief investment strategist at Rauscher Pierce Refsnes of Dallas. “I’m surprised at how well the market’s holding up after a rally like we’ve had, where you’ve made up most of the losses from Oct. 27.”
However, Asian markets began falling again early today, with markets in Japan, Hong Kong and elsewhere falling 3 to 4 percentage points in the first hours of trading.
Computer-related shares were hit harder than most sectors, with the technology-heavy Nasdaq composite index suffering the steepest loss among the leading indexes. The Nasdaq fell 13.89 points to 1,623.44.
The market stumbled at the open after stocks in Hong Kong, where the global financial crisis ignited two weeks ago, took a turn for the worse for the third straight day.
The mood improved in the afternoon as interest rates fell in the bond market, which rallied amid signs of strong demand at Thursday’s auction of new Treasury bills and bonds.
U.S. bond prices rose for a second day as traders and investors snapped up $10 billion worth of 30-year bonds. It was the last of the Treasury’s quarterly debt sale.
Nicholas Walsh, who helps manage $24 billion in assets at J&W; Seligman & Co., said expectations for slow inflation and more turmoil in Asian markets bolstered demand for the securities. “There are a lot of people who think the long bond [yield] is going to 5.5% no matter what,” he said.
The next test for bonds will come today, when the government releases its October jobs report, Walsh added.
The yield on the benchmark 30-year T-bond fell to 6.18% from 6.21% on Wednesday.
The government sold the new bonds at an average yield of 6.20%. It received $2,820 of bids for every $1,000 of securities sold, above the average for the last 10 bond auctions.
“People think it was a good auction,” said Keith Morris, a trader at Chase Securities Inc., one of the 38 so-called primary dealers required to bid at Treasury debt sales.
The auction’s strength helped bonds overcome losses suffered after the Bank of England raised its benchmark interest rate by a quarter-point to 7.25%, a move that increases the appeal of British bonds.
The Treasury also sold $12.3 billion of one-year bills Thursday, $11 billion of 10-year notes Wednesday and $14 billion of three-year securities Tuesday.
In both the stock and bond markets, there appeared to be little reaction to Thursday morning’s news that the number of first-time claims for jobless benefits unexpectedly shot up by 16,000 last week to its highest level in nine weeks.
The weekly tally holds little weight compared with the monthly figures due in today’s government report, which is expected to show that the unemployment rate dipped to 4.8% in October from 4.9% in September.
For now, the absence of rising prices, combined with the recent stock market sell-off, has convinced analysts that the Federal Reserve Board won’t try to slow the economy by raising interest rates when it meets next week.
Declining issues outnumbered advancers by a 4-3 margin on the New York Stock Exchange, where volume totaled 522.18 million shares.
The Standard & Poor’s 500-stock index fell 4.73 points to 938.03, and the NYSE composite index fell 2.02 points to 493.75.
Among Thursday’s highlights:
* Tech issues took a broad beating. The Dow’s biggest decliners included IBM, down $1.44 to $101.06, and Hewlett-Packard, down $1.31 to $63.63.
Elsewhere, Intel fell $1 to $73.63 and 3Com fell $2.44 to $41, the two most active Nasdaq issues.
Following IBM’s lead, PC makers fell. Compaq Computer dropped $1.50 to $65.44; Dell Computer declined $2.63 to $81.
Ascend Communications fell $1.19 to $24.81.
* The biggest gainers were retailers, which jumped on hopes that healthy employment trends and a rise in October retail sales will mean a strong holiday selling season this year.
Wal-Mart rose 81 cents to $36.88, Dayton-Hudson gained $3.25 to $68.75 and Kohl’s rose 69 cents to $69.44. Kmart rose 31 cents to $13.81, Costco rose $2.19 to $41.06 and Hot Topic rose $3.88 to $23. Pacific Sunwear of California rose $1.88 to $31, Payless Shoesource rose $2.31 to $58.81 and Woolworth rose $2.13 to $21.38.
Consolidated Stores rose $2.56 to $48 a day after agreeing to acquire Mac Frugal’s Bargains-Closeouts, which gained $1.19 to $42.
* Among individual issues, American Skiing fell $1 to $17 in its first day of trading as the ski resort owner and operator sold 14.8 million shares at $18 each in an initial public offering.
An IPO of Somnus Medical Technologies rose $2.88 to $13.38.
Eastman Kodak advanced $2.81 to $65.38 on reports that it’s expected to announce massive job cuts next week.
PacifiCare Health Systems rose $3.13 to $68.38 after posting better-than-expected quarterly results.
The dollar fell to a four-month low against the British pound after the Bank of England’s surprise interest rate hike.
The pound ended at $1.6915, up from $1.6813 at Wednesday’s close. The dollar rose to 1.7230 German marks from 1.7176, and was down at 123.03 Japanese yen from 123.07.
