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Wall St. relaxes, a little
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August 19, 1999: 3:20 p.m. ET
Stocks and bonds come off their lows as fears about trade deficit ease
By Staff Writer Martine Costello
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NEW YORK (CNNfn) - Blue chips and technology shares rebounded off their lows in afternoon trading Thursday but remained stuck in the red as investors digested a trade deficit report that shook the battered dollar and the bond market.
Around 3 p.m., the Dow Jones industrial average was down 38.62 at 10,952.76. Earlier in the session the index was down as much as 100 points. On the New York Stock Exchange, declines led advances by 2,150 to 1,525 on a trading volume of 681 million shares.
The Nasdaq composite was down 25.98 at 2,631.75, while the S&P 500 benchmark index was off 8.09 at 1,324.75. Both indexes had been off by more than 1 percent earlier in the day. (Click here for a look at CNNfn's market movers).
The bond market was mixed after the U.S. trade deficit rose to a record $24.6 billion and higher initial jobless claims were reported The benchmark 30-year Treasury bond was off 8/32 a point in price for a yield of 6.01 percent.
The dollar, already weakened by a strengthening yen, was hit hard by the trade gap news. The greenback traded at a seven-month low against the yen, while the euro got a boost from a new survey showing higher confidence in Germany.
The dollar gets weaker with a higher trade deficit because it means that more international goods are coming into the U.S. market. This in turn hurts the growth of U.S. companies and forces them to cut prices. As a result, investor sentiment turns sour.
The weak dollar also creates fear in the U.S. bond market that Japanese will sell their U.S. Treasurys, which in turn could hurt interest rates, said James Awad, chairman of Awad & Associates in New York.
"The trade deficit has always lurked in the background as a potential negative for stocks, but it was fine (in the past) because the dollar was strong," Awad said.
The U.S. Federal Reserve will be examining all these factors when it meets next Tuesday to consider an interest-rate hike.
Analysts expect a 0.25 percentage point rate increase, which could curb consumer demand and make dollar-denominated bonds more attractive to overseas investors, but they worry there may be additional interest rate hikes down the road to keep inflation in check.
Awad pointed out that the rebound in stocks off their lows shows that investors shouldn't read too much into the dollar's struggles, given that it is lighter-than- usual summer trading.
"The dollar could turn around next week," Awad said.
Wall Street loses ground
On Wall Street, most of the Dow 30 stocks were fighting in negative territory.
News that Dow member Alcoa Inc. (AA) and fellow aluminum maker Reynolds Metals Co. (RLM) will merge in a deal worth about $6 billion in stock and debt pushed Alcoa down 1-13/16 at 65-1/16, while Reynolds Metals was off 2-13/16 at 65-7/16.
Book seller Barnes & Noble (BKS) was off 7/8 at 23-7/8 after reporting a second-quarter profit based on strong sales at its "super stores."
Wal-Mart (WMT) lost ground after a report in the Wall Street Journal that it is consolidating international operations. The stock was down 9/16 at 45-13/16.
Among big technology stocks, Microsoft (MSFT) lost 1 at 84 and Intel (INTC) gave up 11/16 to 77-13/16.
In the telecom sector, Bell Atlantic (BEL) lost 2-1/4 at 62-5/16 after seeking approval to offer long-distance service in New York State.
Shares of Ameritrade also suffered after Lehman Brothers lowered fourth-quarter estimates. Ameritrade (AMTD) lost 1-15/16, or about 8 percent, to 21-7/8.
Some bright lights
There were some exceptions to the losses, however.
Seagram (VO) rose after reporting a loss of 32 cents a share that was less than Wall Street expected. The stock was up 3-3/8, or almost 7 percent, at 53-1/2.
And New Jersey water company United Water Resources (UWR) rose after France's Suez Lyonnais des Eaux, the world's largest water company, said it is in talks to take over the U.S firm. United Water Resources was up 15/16 at 28-9/16.
Shares of online computer software retailer Onsale Inc. (ONSL) jumped 1-9/16, or almost 10 percent, to 17-13/16 after the company gave a bullish forecast for revenue growth.
Likewise, American Home Products (AHP) fought the negative tide and was up 13/16 at 45-5/16 after rumors Wednesday that it may merge with Britain's Glaxo Wellcome. Glaxo, which trades as an American depositary receipt, was up 11/16 at 52-11/16.
Some companies got a boost from positive analyst reports. Tandy Corp (TAN) rose after Merrill Lynch added the stock to its Focus One list and said it represented a good value. The stock was up 2-1/16 at 47-1/16. Likewise, Goldman Sachs upgraded power plant owner AES Corp. to a recommended list from "outperform." The stock was up 3-1/4 at 60-9/16.
And Dow member Exxon Corp. (XON) was up after the Journal reported it suspended oil drilling in Russia because of a dispute with the Russian government. Exxon was up 3/16 at 82-3/8. 
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