MARKET SAVVY : Stocks Slide as Rate Fears Flare Anew
Stocks resumed their end-of-summer slump Thursday as concerns about interest rates were compounded by a dismal earnings outlook from Sears.
The retail giant’s share drop of $3.69 to $33.50 helped send the Dow Jones industrials down 94.67 points, or 0.9%, to 10,843.21. But the index had been off as much as 205 points.
In the broad market, losers swamped winners by 21 to 8 on the New York Stock Exchange.
The Nasdaq composite lost 0.6% despite giant Intel’s advance to a record high.
Analysts said investors were spooked by more data suggesting that inflationary pressures could be increasing. What’s more, Federal Reserve Gov. Edward Kelley told Market News International that it would be premature to assume the Fed will wait until next year to raise rates again. The central bank has raised short-term rates twice this summer to slow the economy.
With a key report due today--data on August employment--some investors opted to dump stocks Thursday rather than risk that stronger-than-expected job growth could deepen worries about the direction of interest rates, traders said.
“Who’s going to take a stand when they know they could get clobbered?” said Larry Wachtel, analyst at Prudential Securities.
Kelley’s comments helped push long-term bond yields higher, also undermining stocks. The 30-year Treasury bond ended at 6.13%, up from 6.08% on Wednesday and the highest since Aug. 12.
In currency trading, the dollar was little changed against the yen and the euro.
Some Wall Streeters are nervous about the market’s prospects in September, given the revived fears about the Fed. What’s more, investors have watched this year’s gains in many shares melt away over the last two months, which could encourage some people to take gains soon where they still have them.
The Standard & Poor’s 100 index, which includes many of the biggest blue-chip names, is up 14.9% year-to-date. It had been up as much as 22% at its July peak.
Among Thursday’s highlights:
* Financial stocks dragged the Dow lower as bond yields rose. American Express fell $3.13 to $135.88, J.P. Morgan lost $3.69 to $125.94 and Citigroup sank 94 cents to $43.94.
* Republic New York dived $7.19 to $62.19 on fears its planned merger with HSBC Holdings could collapse because of an inquiry into allegations of securities law violations by Republic’s brokerage unit. The unit may have inflated the value of securities sold to Japanese buyers.
* Retail stocks were broadly lower on news of August sales reports, even though the numbers were favorable for many firms. J.C. Penney fell $1.69 to $36.44, Federated Department Stores slid $2.63 to $44.75 and Dayton Hudson lost $1.63 to $56.63. But Wal-Mart rose 69 cents to $45.69.
* In the tech sector, many semiconductor stocks continued to gain after an industry report showed that worldwide semiconductor sales rose 19.3% in July from a year ago, thanks to strong demand for chips that go into PCs and communications equipment. Sales in Asia rose 29.2% to $2.83 billion, making it the fastest-growing region in July.
Intel jumped $1.88 to a record $85.31, Texas Instruments rose $3 to $84.75 and Micron Technology added $2.63 to $75.25.
* Many Internet stocks were lower, but modestly so. Yahoo eased $1.75 to $141.56, and EBay slipped 50 cents to $121.44.
* Computer networker 3Com jumped $2.31 to $27.06 on revived takeover rumors.
* Some industrial stocks were higher as investors hunted for companies that could benefit from a stronger economy--even if it means higher interest rates.
Dow Chemical gained $1.25 to $115.25, PPG Industries rose $1.19 to $62.38 and 3M jumped $1.63 to $96.31.
In foreign trading, European and Asian markets were broadly lower.
Market Roundup, C6
