It was turnabout day on the stock market Tuesday, but the bond market continued moving ahead.
Economically cyclical blue-chip stocks, which advanced Monday, reversed course, pushing the Dow Jones industrial average down 19.72 points to 3323.27. Broader market indexes also declined, but advancing issues outnumbered losers among New York Stock Exchange-listed stocks by about 10 to 9.
Health-care and technology stocks, which have been battered in recent days, rebounded a bit. Merck, Bristol-Myers and Abbott Laboratories posted gains in heavy trading. There was no news affecting the stocks, but investors apparently believed the selloff has been overdone.
The Nasdaq market also turned in a mixed performance, with several big-name computer and biotech stocks rebounding from Monday’s bashing. Amgen closed up $2 to $43.50; Microsoft gained $2.75 to $79.50. Even Synergen, the Colorado biotech stock that was pummeled Monday, got off the floor, closing up $1.25 to $14.75. The stock closed Friday at $42.12
A downbeat report on consumer confidence hit several retailing stocks. The survey was taken before President Clinton’s State of the Union speech. But many analysts believe consumers aren’t responding to positive economic indicators because of job worries.
Sears closed down $1.87 to $52. High-end retailer Nordstrom slid $5.75 to $32.87 after the company told analysts their earnings projections were too high.
Philip Morris and other tobacco stocks continued to drop on fears that Clinton would seek to tax tobacco to help pay for expanded health-care coverage.
Several financial institutions that sponsor credit cards sold off because of a rumor that Clinton would seek new regulation of consumer credit interest rates. First Chicago, one of the nation’s largest credit card sponsors, dropped $1.50 to $41.12. Citicorp of New York dropped 37 cents to $25.37.
Bond bonanza
Tuesday, it was the 10-year Treasury note that broke through a key benchmark. It dropped in yield to 5.897 percent, dipping below the 6 percent mark for the first time since January 1972, according to Bloomberg Business News.
The bellwether 30-year Treasury bond, which pierced 7 percent Monday, dropped to 6.83 percent. Corporate borrowers are rushing to get in on this remarkable rally.
The decline in medium- and long-term interest rates is all the more remarkable given the ingrained skepticism and inflation bias of many veteran bond traders. All day Tuesday, financial news wires were abuzz with reports of higher commodity prices and sometimes impassioned Clinton bashing.
But bond prices, which move opposite to bond yields, rose on cautionary remarks Tuesday by Federal Reserve Board Chairman Alan Greenspan about the resilience of the economic recovery, the downbeat consumer confidence report and the general belief that the Clinton economic program will curtail the economic recovery. Also helping were fresh comments by Clinton that more cuts in federal spending would be OK with him.
The bond rally has been so strong that stock traders began to worry that even a normal pull-back in bond prices would sink cyclical stocks.
Two cents
It’s no surprise that financial markets would register their “votes” on Clinton’s economic policy. What is surprising is the extent to which presumably sophisticated traders and investors are drawing conclusions before the first vote is taken in Congress.
For example, what ever happened to the widespread belief in the power of the health-care lobby? No wonder Clinton’s advisers are tickled pink by the dismay from Wall Street. If financial markets ignored the Clinton rhetoric, which, after all, is all we have now, it would be a louder rebuke than the most stinging Wall Street Journal editorial.
Clinton needs momentum and clout as well as Greenspan’s blessing to enact his program-whatever it may be at the end of the day-and the gloomy prophecies by Wall Street analysts ironically are giving him both.
