Bond Yields Back Off; Dow Falls 34
Treasury bond yields eased slightly Wednesday after soaring Tuesday, while the stock market recorded a second day of modest losses.
Federal Reserve Chairman Alan Greenspan, in a second day of testimony before Congress, reiterated a mixed assessment of the economy. He sounded generally upbeat, and also appeared to try to soothe the bond market by suggesting that the Fed could resort to “non-traditional” means to push interest rates lower.
Analysts said that was a reference to the idea that the central bank could buy long-term bonds in the market. On Tuesday, Greenspan said such a scenario was unlikely. On Wednesday he backtracked, saying he “wasn’t aware I took anything off the table” in terms of options.
The yield on the 10-year Treasury note, which had rocketed to 3.98% on Tuesday from 3.72% on Monday, slipped to 3.92% late Wednesday after rising above 4% early in the session.
In the stock market, key indexes fell at the outset of trading and then drifted most of the day.
The Dow Jones industrials closed down 34.38 points, or 0.4%, at 9,094.59, after losing 0.5% on Tuesday.
The Standard & Poor’s 500 index fell 6.33 points, or 0.6%, to 994.09, while the Nasdaq composite lost 5.24 points, or 0.3%, to 1,747.97.
Losers outnumbered winners by 2 to 1 on the New York Stock Exchange and by 18 to 14 on Nasdaq, in heavy trading.
The economic news Wednesday mostly was encouraging. Overall production at U.S. factories, mines and utilities rose 0.1% in June, the Fed said, with factories showing the biggest output gain since January.
The stock market rally since mid-March has been based in large part on hopes for an economic revival. But some analysts say the market may be running out of steam.
“The larger question exists of, ‘Have we run too far, too fast?’ ” Charles White, vice chairman of money manager OAM Avatar, told Bloomberg News.
Some downbeat corporate earnings forecasts this week have contributed to investors’ nervousness. On Wednesday, EMC beat second-quarter earnings estimates by a penny a share, but the maker of data storage equipment said its third-quarter results would merely meet expectations. The stock slid 90 cents to $10.17.
Ford Motor slid 65 cents to $10.99 after forecasting a wider-than-expected third-quarter loss of 15 cents a share. And telecom equipment maker Lucent Technologies slumped 24 cents to $1.68 after saying it won’t return to profitability until 2004.
On the plus side, chip giant Intel jumped $1.21 to $25.31 after reporting better-than-expected second quarter earnings late Tuesday.
Southland bank City National surged $3.68 to $48.68 on its strong profit report.
Among Wednesday’s highlights:
* Airline stocks were mostly higher. AMR, parent of American, soared $1.10 to $11.66 after reporting a narrower second-quarter loss. Continental gained 67 cents to $15.47 and Delta rose 57 cents to $14.85.
* Internet-related shares pulled back. Sohu.com lost $1.49 to $40.17, Digital River slid $1.27 to $22.48 and Amazon.com was off 75 cents to $37.68.
* Wireless technology firm Qualcomm dipped 48 cents to $37.32 despite raising its quarterly dividend 40%, to 7 cents a share from 5 cents.
* Prologis added 25 cents to $27.50. The real estate investment trust will be added to the S&P; 500, replacing Mirant.
* Crude oil had its biggest decline in three weeks after a U.S. Energy Department report said gasoline inventories rose unexpectedly last week. Near-term oil futures in New York fell 57 cents to $31.05 a barrel.
