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Wall St. under rate weight
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June 24, 1999: 5:09 p.m. ET
Rising bond yields, profit warnings lead to hefty losses for stocks
By Staff Writers Malina Poshtova Zang and Robert Scott Martin
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NEW YORK (CNNfn) - U.S. stock markets suffered sizable losses Thursday as bond yields headed higher and speculation rose that an expected Federal Reserve rate increase next week might be bigger than initially anticipated.
The stock market recovered from its worst losses for the day as bond prices edged off their lows and the yield on the 30-year Treasury bond retreated from its 19-month high, but investors remained nervous, using every excuse to cash out, especially in the interest-rate sensitive sectors like financial services and technology.
The Dow Jones industrial average lost 132.03 points, or 1.2 percent to 10,534.83. On the New York Stock Exchange, declines trounced advances 1,971 to 951, as volume reached a 693 million shares.
The Nasdaq Composite shed 44.13 points, or 1.7 percent, to 2,553.99 and the S&P 500 index lost 17.28, or 1.3 percent, to 1,315.78.
Art Hogan, chief market strategist at Jefferies & Co., said Wall Street remained "fixated on everything related to interest rates," especially after Wednesday's market rumors, since discounted, that the Federal Reserve will raise rates by a half percentage point next week.
As an indication of investors' bearish rate expectations, the bond market sank for the fifth day in a row as traders looked warily toward the Fed meeting. Amid rumors of hedge fund selling, the bellwether 30-year Treasury bond lost 7/32 of a point in price as investors fed their ongoing gloom on news that durable-goods orders rose an unexpectedly strong 1.4 percent in May. The bond's yield, a key reflection of long-term interest rate trends, surged to 6.16 percent. Earlier in the day, the yield climbed to 6.19 percent -- a level not seen since November 1997.
The dollar followed U.S. securities prices lower, giving up ground against both the euro and the yen.
Semiconductors take a hit
In the stock market, a number of profit warnings and a cautionary statement from long-time Wall Street bull Abby Joseph Cohen heightened the downward pressure.
While Cohen, Goldman Sachs chief market strategist, said she did not "expect any significant impact on the market" from a rate hike, she still cautioned that "there could be some temporary discomfort until we all recognize that it really was a good idea."
Meanwhile, shares of semiconductor manufacturers, the companies that make computer chips, took an especially large hit after two of the sector's leaders confessed to second-quarter profit disappointments.
Advanced Micro Devices (AMD), the second-largest computer chip maker after Intel, late Wednesday said its second-quarter loss would be larger than expected, mainly due to a raging price war with Intel. AMD's stock tumbled 1-1/8 to 117-1/16.
In the same league, Micron Technology (MU), also late Wednesday and also blaming pricing pressures, reported a loss of 10 cents per share in its fiscal third quarter, while Wall Street had expected the company to break even. The stock shed 4-1/2, or more than 10 percent, to 39-7/16.
Intel (INTC), the world's leading chip maker, joined its rivals in the red, losing 1-1/2 to 55-1/16.
Warnings trickle in
Elsewhere in the high-tech sector, shares of SCM Microsystems (SCMM) plunged 5-1/2, or more than 10 percent, to 48-7/8 after the maker of data security and access control hardware and software said acquisition costs and slow digital TV sales would result in a second-quarter loss.
In another corner of the market, Dow component Goodyear Tire & Rubber (GT) joined the parade of companies to issue profit warnings, blaming poor sales overseas and disappointment with the implementation of restructuring efforts in North America. The stock finished unchanged at 56-5/8 after the company said it expects to earn 40 cents to 50 cents per share in the second quarter, sharply below the 77 cents per share consensus market estimate.
Investment banker Morgan Stanley Dean Witter (MWD) got a similar reaction despite posting better-than-expected second-quarter profits. Although earnings surged 35 percent to $1.95 per share, shares slipped 1-15/16 to 91-5/16 in keeping with post-earnings performance from fellow brokers Lehman Brothers (LEH) and Goldman Sachs (GS).
The certainty of higher interest rates ahead has heaped selling pressure financial stocks ranging from global banks to Wall Street brokers in recent weeks, robbing the brokers in particular of the upward momentum that their bullish earnings reports would ordinarily produce.
As the rate fears intensified yet again Thursday, Dow investment banker J.P. Morgan (JPM) lost 2-11/16 to 127-15/16, while Citigroup (C) fell 1-11/16 to 44 and American Express (AXP) slid 2-5/8 to 120.
Deals and rumors of deals
Investors looking for a distraction from the stream of second-quarter earnings and earnings warnings focused on a couple of large corporate deals, completed or in the works.
In the wireless communications sector, news that Omipoint (OMPT) and VoiceStream Wireless (VSTR) have agreed to join forces in a $4.5 billion deal, sent shares of Omnipoint soaring 8-7/16, or more than 39 percent, to 29-1/2. The stock of VoiceStream shed 1 to 28-1/2.
And a confirmation by Compaq (CPQ) that the computer maker is indeed in talks to sell its AltaVista Web portal and other Internet assets to Internet venture capital firm CMGI (CMGI) failed to attract buyers. Compaq shares eased 3/4 to 22-11/16, while CMGI lost 2-7/16 to 96-1/2.
Elsewhere on the Internet, shares of Internet service provider Mindspring (MSPG) jumped 3-1/2 to 82-1/8 after the company hinted that it is discussing "possible business combinations," possibly a merger or other strategic agreement.
(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.) 
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