|
Dow under rate pressure
|
 |
June 9, 1999: 5:29 p.m. ET
Rising bond yields raise interest rate concerns, but tech stocks rally anyway
By Staff Writers Malina Poshtova Zang
|
NEW YORK (CNNfn) - U.S. blue chip stocks suffered a second straight day of declines Wednesday, hurt by increasing fears that interest rates are on the rise, fueled by a surge in bond market yields.
But the rate jitters failed to deter investors interested in the technology sector, leading to a strong rally on the Nasdaq as most of its major high-tech components enjoyed strong gains.
The Dow Jones industrial average fell 75.35 points to 10,690.29. On the New York Stock Exchange, breadth was negative, with losers ahead of gainers 1,533 to 1,374. Volume was less than 653 million shares -- the lightest for any trading session so far this year.
The Nasdaq composite rallied 44.79 points, or 1.8 percent, to 2,519.35, while the S&P 500 index edged up 1.31 to 1,318.64.
Vince Farrell, chief investment officer at Spears, Benzak, Salomon & Farrell, said he believes a 25 basis-point rate increase is already factored into the market, but the possibility of rates heading even higher is likely to keep stocks on edge over the near term. There are 100 basis points in 1 percentage point. (484K WAV) or (484K AIFF)
The bond market opened higher but quickly deflated as the yield of the bellwether 30-year Treasury bond pierced the psychologically important level of 6 percent for the first time in more than a year. The bond ended the day down 10/32 of a point in price, yielding 6.02 percent.
Wall Street's uncertainty helped push the dollar lower against the yen and the euro.
Rates take center stage
Stock investors proved cautious about deepening their positions in most issues as interest rates -- mirrored by bond yields -- looked almost certain to rise in the near future.
The Federal Reserve's Open Market Committee changed its rate bias last month to reflect a predisposition to raise rates in future policy decisions. In doing so, it allowed investors to brace for the possibility of one or more rate hikes by discounting stock prices in advance.
Rising interest rates have an especially depressing effect on shares of financial companies, which suffer as borrowing dries up, and growth-oriented companies that rely on heavy borrowing for expansion.
Although the market averted a dramatic sell-off because investors already had prepared themselves for 6 percent bond yields, financial stocks still suffered as yields ticked even higher. On the Dow, American Express (AXP) tumbled 3-7/8 to 125-1/8, undoing its recent advance, while J.P. Morgan (JPM) shed 1-1/4 to 129-7/8.
Techs on the bullish side
Defying the broader market's nerves, blue-chip technology stocks staged a strong recovery from Tuesday's weakness after a report of strong semiconductor sales growth ahead beckoned investors back into the computer sphere.
The Dow's computer components both rebounded, with IBM (IBM) rising 3/8 to 117 and Hewlett Packard (HWP) advancing 2-1/8 to 92-11/16.
Gains among the Nasdaq's technology leaders were similarly robust. Cisco Systems (CSCO) rose 2-1/16 to 113-3/4, Intel (INTC) gained 1-7/16 to 53-1/8, Microsoft (MSFT) leapt 2-15/16 to 83-5/16 and Dell (DELL) advanced 1-1/2 to 35-1/2.
Shares of Sun Microsystems (SUNW) jumped 2-3/4 to 61-15/16 after the computer-workstation maker signed a 10-year supply pact with communications-equipment titan Motorola (MOT). Motorola, which Tuesday entered a wireless-networking alliance with Cisco, climbed 5/8 to 84-11/16.
Transports extend losses
The Dow transports fell for a second consecutive day, shedding 44.26 points, or 1.3 percent, to 3,380.57 as airline stocks continued their precipitous descent.
Warburg Dillon Read analyst John Pincavage knocked the aviation sector Wednesday by downgrading several airlines to "reduce" from "hold," warning that if traffic and profits keep falling the sector could be on the edge of "absolute under-performance."
Among the carriers Pincavage downgraded, American Airlines holding company AMR (AMR) lost 3/4 to 66-15/16, Delta Air Lines (DAL) plunged 3 to 56-15/16 and United parent UAL (UAL) fell 1-15/16 to 61-7/8. Alaska Air (ALK) shed 1-13/16 to 39-1/4 and US Airways (U) eased 1-5/16 to 47-9/16, while Northwest (NWAC) lost 1 to 30-1/16.
Another aviation-related issue, aerospace and defense power Lockheed Martin (LMT) tumbled 5-9/16, or almost 14 percent, to 34-7/8 after the company warned of a second-quarter loss and said profits in 1999 and 2000 will be sharply below forecasts -- blaming rising costs and lower productivity.
Shares of fellow aerospace manufacturer and Dow member Boeing (BA) fell in tandem, sliding 1-9/16 to 42-1/4.
Among the Dow's other decliners, Procter & Gamble (PG) shed 2-9/16 to 2-1/4 after the home products manufacturer said it will cut 15,000 jobs, or 13 percent of its workforce, in a massive restructuring program aimed at cutting costs and speeding up growth.
On the positive side, shares of Qwest Communications (QWST) rallied 3-11/16 to 47 on news that BellSouth (BLS) is considering bidding for control of the company after recently acquiring a 10 percent stake in Qwest. BellSouth's stock slipped 1/16 to 46-1/16.
(Click here for a look at today's list of CNNfn's market movers.)
(Click here for a look at today's CNNfn technology stocks report.)
|
|
|
|
|
 |
|
