Stocks Give Up More Ground as Yields Surge
Stocks struggled to further losses Monday as long-term interest rates soared to 21-month highs in the bond market.
Meanwhile, oil zoomed past $21 a barrel.
The Nasdaq composite index slumped 1.1% to 2,518.98, continuing its broad decline. Losers topped winners by 21 to 16 on Nasdaq.
The Dow industrials eased just 6.33 points to 10,707.70, but losers outnumbered winners by 3 to 2 on the New York Stock Exchange.
Trading volume was modest, however.
Analysts said things could have been worse, with yields soaring again in the bond market.
The yield on the benchmark 30-year Treasury bond climbed to 6.23%, the highest level since Nov. 4, 1997, from 6.18% on Friday.
The bond market, already worried about inflation pressures and the threat of another Federal Reserve hike in short-term interest rates, also is facing heavy new supply this week.
The Treasury today kicks off three days of bond auctions with the sale of five-year notes.
Inflation-wary bond investors got more bad news Monday in the form of higher crude oil prices.
Crude oil for September delivery rose 39 cents, or 1.9%, to $21.27 a barrel on the New York Mercantile Exchange.
It was the highest price since October 1997. Prices are up almost 77% this year, and analysts said crude oil could reach $22 by the end of the week.
In the stock market, analysts remain divided over how vulnerable share prices are to a much deeper decline.
But Arthur Hogan, chief market analyst at Jefferies & Co., said it’s unlikely the market will break out of its trading range before Aug. 24, when the Fed is expected to raise interest rates for a second time this summer, trying to slow the growth of the nation’s economy to a noninflationary pace.
“Their move is in the bag,” he said. “But until they make that move, we’ll see a lot more of this sideways action.”
While the broad market sputtered, a flurry of deals and new products spurred gains for some computer-related companies. Advanced Micro Devices rose $1.88 to $19.25 after releasing a new computer microprocessor it says can outperform Intel’s high-end chip.
Other chip-related stocks gained as prices for the memory chips used in personal computers rose in Taiwan. Intel climbed $1.88 to $73.44, Applied Materials gained $3.19 to $77.88 and Motorola advanced $2.38 to $91.13.
Net2Phone, which provides telephone service over the Internet, rose $3.88 to $20.38 after NBC agreed to take an ownership stake in exchange for prominent placement of Web site links.
And Data General soared $4.25 to $17.44 after agreeing to be acquired by EMC, a larger rival in the computer data-storage business. EMC fell $3 to $57.
Among Monday’s highlights:
* Battered Internet shares fell further. EBay lost $3.63 to $79.63, Amazon.com dropped $4.06 to $85.50, EarthWeb lost $3.63 to $34 and EToys slid $3 to $30.
One new Net stock issue was gutsy enough to debut: Interworld priced its shares at $15 each. It will begin trading today with the symbol INTW.
* Oil and oil services shares were mostly higher as oil prices jumped. Chevron rose 81 cents to $96.63, Royal Dutch Petroleum gained $2.25 to $65.25, R&B; Falcon climbed $1.38 to $12.13, Oceaneering International advanced $2.88 to $21.69 and Diamond Offshore Drilling jumped $3.31 to $38.88.
* Shares of North American gold companies rose as the gap between supply and demand narrowed, signaling that gold prices could recover from near 20-year lows.
The Standard & Poor’s gold index of producers jumped 6.8% to a three-month high. Newmont Mining rose $1.81 to $20.88, Placer Dome gained 69 cents to $10.81 and Homestake Mining climbed 69 cents to $8.69.
* MCI WorldCom fell $3.81 to $77.44 after saying it will offer evening long-distance service for 5 cents a minute, matching a plan by rival Sprint. Analysts fear the price cuts will eventually harm earnings.
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Market Roundup, C13
