LG, TYX is pressing 6.25 U.S. Stocks, Bonds Fall, Dollar Dips
By Jan Paschal
NEW YORK (Reuters) - U.S. stocks and bonds settled sharply lower Thursday, after surprising news of strong economic growth in Japan rekindled fears of rising interest rates.
The dollar ended Thursday's U.S. trading session slightly lower against both the Japanese yen and Europe's single currency. Gold hit yet another 20-year low.
The Dow Jones industrial average closed down 69.02 points, or 0.65 percent, to 10,621.27 after being down nearly 165 points at the day's low. The blue-chip index has lost almost 300 points in three days.
In the broader market, declining issues beat advances 1,931 to 1,005 on active volume of 700 million shares on the New York Stock Exchange.
The technology-driven Nasdaq Composite index, which had rallied Wednesday, finished off 34.73 points, or 1.38 percent, at 2,484.62.
The stage for Thursday's sell-off was set when Japan said its economy surged at a stunning 7.9 percent annual pace in the first three months of the year, breaking a run of one-and-a-half years of negative growth.
The good news for Japan hit the U.S. bond market like a ton of bricks. The yield on the benchmark 30-year bond surged to its highest level in more than a year -- rising late Thursday to 6.07 percent -- up from Wednesday's close of 6.03 percent. Its price, which moves in the opposite direction, fell 14/32, or $4.375 for each $1,000 in face value.
''The worry is that synchronized global expansion is becoming more and more popular,'' said Hugh Johnson, chief investment officer at First Albany Corp. ''Worries about inflation are deepening.''
The market got a bit of a break Thursday afternoon when Fed Chairman Alan Greenspan did not address the outlook for interest rates in a prepared speech at Harvard University's commencement ceremony.
Earlier in the day, Fed Governor Roger Ferguson pointed out that some factors that have kept prices down, such as low world oil prices, were reversing, saying the Fed was watching the situation closely.
Financial stocks, which are sensitive to interest rates, took a beating Thursday. Merrill Lynch was off 2-3/8 at 70-3/16, Citigroup lost 1-1/8 at 42-3/16 and American Express ) shed 2 at 123-1/8.
Technology stocks and the Internet sector, in particular, also slid, eroded by the interest rate fears.
America Online Inc (NYSE:AOL - news) was down 4-3/4 at 105-15/16. Merrill Lynch Internet analyst Henry Blodget said subscriber growth at the online services provider will be at the low end of expectations.
International Business Machines Corp. (NYSE:IBM - news) fell 1-11/16 to 115-1/4 and Microsoft Corp. (Nasdaq:MSFT - news) fell 2-7/16 to 79-7/16.
The market's inflation watch will continue Friday, when the government will release two key U.S. economic reports for May at 8:30 a.m. EDT (1230 GMT) -- the Producer Price Index and retail sales.
Economists polled by Reuters, on average, expected the PPI to rise 0.2 percent overall and 0.1 percent at the closely watched core rate that excludes food and energy prices. Next Wednesday, the Consumer Price Index will be released.
Analysts predicted retail sales in the United States grew a seasonally adjusted 0.8 percent in May, following 0.1 percent gains in both March and April, according to a Reuters survey.
Late Thursday afternoon in New York, the dollar traded at 118.99 yen, down from 119.12 24 hours earlier and far below its 119.92 session high. Against the euro, the dollar stood at 1.0480 per euro, down from 1.0470 per euro Wednesday.
On the COMEX division of the New York Mercantile Exchange, gold for August delivery fell $1.00 per ounce to $260.10. Spot bullion was quoted at $258.30 to $258.80 per ounce, compared with the late afternoon fix in London at $258.60, and the early fix at $258.35, a 20-year low.
In London, the blue-chip FTSE 100 index closed down 49.6 points, or 0.8 percent, at 6,403.4, despite a surprising cut in a key U.K. interest rate. In Tokyo, the Nikkei 225 ended Thursday's session up 2.89 percent or 480.12 points at 17,102.62 -- its first close above the psychologically important 17,000-point level since May 6. |
