Stocks Hold Back as Bond Yields Climb
Stocks closed broadly but modestly lower on Monday as rising bond yields again distracted investors from the good news of stronger corporate earnings.
The Dow Jones industrial average fell 120.32 points, or 1.2%, to close at 10,349.93, taking back part of last week’s net 450-point rebound.
But the Nasdaq composite was off just 0.57 point to 2,815.95, and the Russell 2,000 small-stock index eased 0.93 point to 417.76. Still, losers topped winners by 3 to 2 on the New York Stock Exchange and by 21 to 19 on Nasdaq. Trading was moderate.
Another surge in bond yields to fresh two-year highs at midday kept a lid on stocks, traders said. “Bonds are providing tough competition for returns on equities,” said Robert Stovall, president of Stovall/Twenty-First Advisors in New York. “That’s especially true in a nervous, insecure market.”
Indeed, despite a strong earnings report from American Express, for example, the company’s shares sank $5.25 to $143.38 on Monday.
AT&T;, however, rose $1.69 to $44.69 after its results were reported.
“Looking ahead, equity markets need a recovery, or a least a stabilization in the bond market,” before stocks can make another run at the record levels reached this summer, said John H. Shaughnessy, chief investment strategist at brokerage Advest.
In other action Monday, the dollar slipped again against the yen. Gold fell below $300 for the first time since Sept. 30, with near-term futures off $2.80 at $299 an ounce.
Among Monday’s highlights:
* Many financial stocks gave ground after soaring on Friday, after Congress and the White House agreed on a compromise that will pave the way for a further breakdown of the walls between banking and securities. Stocks had jumped on anticipation of a new wave of mergers. But many of the shares slid back on Monday. In the bank sector, J.P. Morgan fell $5.44 to $120.19, Citigroup lost 38 cents to $47.81 and Chase Manhattan fell $2.69 to $77.94. In the insurance sector, Allstate rose 81 cents to $25.81, but American International Group was unchanged at $91.81.
* Brokerage stocks, also big winners on Friday, fell after a Merrill Lynch analyst said the recent rally has left most stocks in the industry fairly valued. Lehman Bros. fell $2.31 to $65.63, and Morgan Stanley Dean Witter fell $2.38 to $100.50.
* Tech stocks were mixed. Intel fell $2.19 to $71.25, and IBM eased 6 cents to $93.88, but Internet issues were strong. EBay jumped $8.25 to $150.88, and Amazon.com gained $4.13 to $82.75.
* Lucent Technologies jumped $3.50 to $59.88 ahead of its earnings report, expected today.
* Utility stocks didn’t get much spillover benefit from news that billionaire Warren Buffett is part of a group buying Iowa utility Mid-American Energy. MidAmerican jumped $6.13 to $33.38, but the Dow utility index eased 0.1% to 294.47.
Edison International inched up 19 cents to $27.63, but American Electric Power slipped 13 cents to $33.25.
* Some radio-related stocks attracted buyers. Cox Radio rose $2.44 to $66.06, and Clear Channel gained $2.63 to $80.50.
Market Roundup, C14
*
NASDAQ TICKER
Nasdaq on Monday extended its stock quote reporting ticker to 3:30 p.m. Pacific time. For an explanation of what the late ticker means, see story on Page C15.
