Dow Tumbles 132 on Growing Fear Over Rates
Stocks, bonds and the dollar settled sharply lower Thursday as investors remained in the grip of interest rate anxiety.
The Dow Jones industrial average fell 132.03 points to close at 10,534.83, the fourth straight decline for the blue-chip index. The Dow has now lost 320 points since Monday, nearly erasing last week’s 365-point gain.
“The song remains the same. The doomsday bond vigilantes are playing for the worst-case scenario, and equities are following,” said Bryan Piskorowski, market analyst at Prudential Securities.
Broader stock indicators also dropped. The Standard & Poor’s 500 index fell 17.28 to 1,315.78, and the technology-heavy Nasdaq composite index lost 44.13 to close at 2,553.99.
Most analysts expect companies to report generally robust earnings after the second quarter ends next week. But amid concerns about the Federal Reserve’s plans to raise interest rates to slow economic growth, some say the market has grown too fragile to withstand much bad news.
The bond market’s continuing slide also pressured stocks. The benchmark 30-year Treasury bond yield rose to 6.16%--its highest level since November 1997--from 6.14% the day before. Rising bond yields have presented investors with an attractive alternative to stocks.
Analysts said last week’s presumption that the Fed will raise rates only a quarter of a percentage point has given way to a belief that the Fed might raise rates higher or more than once.
“Everyone is on pins and needles, waiting to see what the Fed will do,” said Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis. Sohn said that while market players fully expect a rate hike, they will be alert to clues about the Fed’s future course.
Declining issues outnumbered advancers by 2 to 1 on the New York Stock Exchange, where volume was weak. The NYSE composite index dropped 6.78 points to 623.97.
The Russell 2,000 index of smaller companies fell 3.88 points to 443.16.
In currency trading, the dollar fell against the euro, which fetched $1.040, up $0.007, and against the Japanese yen, to 121.78 from 121.92 the day before.
On foreign stock markets, Singapore shares closed at a new high, but U.S. interest rate jitters and the recent rally in Asian stocks sparked selling elsewhere in the region.
Among U.S. highlights:
* Irvine-based Data Processing Resources catapulted $11.13 to $23.38 after Compuware agreed to buy it for $24 per share, or as much as $345.6 million. Compuware eased 6 cents to $30.19.
* Internet service provider MindSpring Enterprises surged $3.50 to $82.13 after saying it’s in talks about possible business combinations, as online companies seek to remain competitive amid consolidation.
* Quepasa.com, an Internet portal targeted at the Latin market, jumped 43% after its initial public offering, bucking the recent trend of soft IPO performance for “pure play” Internet companies. Quepasa.com rose $5.13 to $17.13 after selling at $12 a share, the top of the expected range.
* Investment firm Morgan Stanley Dean Witter beat Wall Street earnings estimates in its quarterly report. But the firm’s stock followed the pattern of rival brokerages this week, falling $1.94 to $91.31 as interest rate concerns outweighed profit news.
* Electronic-billing company CheckFree Holdings slipped 63 cents to $28.13 after tumbling 24% the day before on the news that three major banks were going into the same business. Meanwhile, CheckFree withdrew a secondary stock offering worth up to $170 million.
* Parexel International slid $4.56 to $16.94 on fears that its planned acquisition by rival drug-services company Covance could fall apart. Covance gained $1.75 to $21.56.
Market Roundup, C6
