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Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: ViperChick Secret Agent 006.9 who wrote (41511)	4/27/1998 1:44:00 PM
From: fred woodall	Respond to of 58727

Interest rates jumped above the psychologically important 6% level Monday, amid fresh fears that domestic economic strength may prompt monetary-policy tightening by the Federal Reserve. The market's negative sentiment was compounded by surprisingly strong data on March existing-home sales. At about 1:30 p.m. EDT, the yield on the bellwether 30-year bond was at 6.06%, up sharply from 5.94% late Friday. The bond's price was down 1 20/32 at 100 26/32. The 10-year note was down 1 2/32 at 97 23/32 to yield 5.80%. Three-month bills were up two basis points at 4.95 to yield 5.07%. Treasury prices dropped amid investors' concerns that if reports due out later this week on first-quarter gross domestic product and employment costs come in high, they may prompt the Federal Reserve to raise short-term interest rates. Concerns about such a pre-emptive move against inflation were sparked by an article in Monday's Wall Street Journal indicating that Fed policy makers shifted to a tightening bias at their March 31 meeting. In doing so, they abandoned the neutral stance that was adopted in December to demonstrate, as the Fed put it, that they might cut rates if "the turmoil in Asia were to intensify." "What (the Wall Street Journal article) tells is not only does the Fed have a bias to tighten but they wanted everyone to know that," said Credit Suisse First Boston market stretegist Mike Cloherty. "The fact that they want everyone to know that is as important as the fact they moved (to a tightening stance)." "There was a period of time when the domestic economy took a backseat because of the situation developing in Asia" but that is no longer the case, said Dave Connors, head government bond trader at Credit Suisse First Boston in New York. "I think the data are very important and I think that's what the Fed is telling the market." Most of the data scheduled for release this week are expected to show strength in the domestic economy. The market was hit by the first of those numbers Monday morning when existing-home sales hit a record rate. The National Association of Realtors reported that sales of existing single-family homes rose 2.5% in March to a record 4.890 million units at an annual rate. The consensus was for a 3.2% decline to a 4.6 million seasonally adjusted annual rate. "It's another signal to the Fed that the housing market is hot," said Peter Kretzmer, senior economist at NationsBanc Montgomery Securities. Better buying came into the market after the initial decline as weakness in stock prices sparked some buying in the shorter-term issues, market participants said. "I would expect, as the stock market continues to trade off, more money to flow into our front end," said Connors. At the Treasury's weekly auction Monday afternoon, the average discount rate for $5.77 billion of three-month bills was 4.940%. The average discount rate for $7.26 billion of six-month bills was 5.115%. The average discount rates were up from last week's auction, when they were 4.985% and 5.060%, respectively. Looking ahead to Tuesday's data, durable-goods orders are expected to have rebounded slightly in March as the transportation sector recovers from its slump in February. A Dow Jones-CNBC survey of 14 economists forecast a median increase of 0.8% in March durable-goods orders, compared with a 1.1% decline in February. The Commerce Department will report the durable-goods data Tuesday at 8:30 a.m. EDT.