Dow Off 231 as Yields Near Their ’99 High
Long-term bond yields rose to near their 1999 highs Tuesday amid growing inflation jitters, helping to send stock prices sharply lower.
The Dow Jones industrials slid 231.12 points, or 2.2%, to 10,417.06. It was the Dow’s steepest point drop since May 27, when the blue-chip index fell 235.23 points.
The broad market also was very weak, with falling stocks outnumbering rising issues by 21 to eight on the New York Stock Exchange and by 24 to 15 on Nasdaq. Trading volume, however, was well below recent highs.
Most key indexes fell somewhat less than the Dow. The Nasdaq composite lost 1.5% and the Russell 2,000 small-stock index fell 1.3%.
Bond traders, returning from the Columbus Day holiday, pushed the yield on the bellwether 30-year Treasury bond to 6.22%, up from 6.19% on Friday and the highest since the yield peaked at 6.28% on Aug. 12.
“The market’s getting increasingly nervous” about inflation, said John Poole, head of a $12-billion bond portfolio at Mellon Private Asset Management in Boston.
No major economic reports were released Tuesday, but two key ones loom: the September wholesale inflation and retail inflation indexes, due out Friday and Tuesday, respectively.
“There are still concerns out there about whether the Fed is going to raise rates again,” said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. “And given the strength of the market last week, that provides as good an opportunity as any for some profit-taking.”
Stocks last week recorded their best gains since early July.
On Tuesday, a shocking earnings shortfall projected by defense contractor Raytheon overpowered other positive earnings reports, traders said. Raytheon shares lost nearly half their value.
What’s more, the dollar began to slide again against the Japanese yen, falling to 106.31 yen in New York from 106.68 on Monday. And oil prices rebounded after a recent slide.
“The same old devil is hurting the market,” said John H. Shaughnessy, chief investment strategist at Advest Inc. “Investors are worried about bonds and the dollar.”
Among Tuesday’s highlights:
* Financial firms, which often suffer as interest rates rise, were mostly lower. American Express fell $3.63 to $145.25, Wachovia lost $2.50 to $81.19 and PNC Bank fell $2.13 to $53.94.
* Two defense issues, Boeing and United Technologies, helped drag down the Dow as they fell with Raytheon. Boeing slid $2.31 to $39.63 and United Tech fell $3.44 to $55.
* Major tech stocks were weak, with IBM falling $4.25 to $110, Texas Instruments down $5.19 to $85 and Sun Microsystems down $2.19 to $90.44.
Among Internet shares, Yahoo fell $7.50 to $173.88, EToys lost $3.50 to $80.75 and America Online slid $7.06 to $114.
* On the plus side, energy stocks rose with crude oil prices.
Crude oil futures for November rose almost 5%, up $1.03 to $22.30 a barrel, the biggest gain in seven months.
World crude oil demand may rise 2.5% in the last three months of the year from the previous quarter amid increased buying of heating oil in Germany, the Paris-based International Energy Agency said Monday. The report helped end a slide that sent crude to a six-week low Friday.
“It’s been chilly, so everybody’s thinking winter,” said Chester Irvin, a trader at ABN Amro Inc. in New York.
Among energy stocks, Chevron rose $1.13 to $88 and Elf Aquitaine gained $1.44 to $87.69.
In other commodity markets, gold prices fell again, with near-term futures in New York down $2.10 to $316.70 an ounce.
*
Market Roundup, C12
