Stocks lost ground again today as long-term interest rates soared to a 21-month high in the bond market.
The Dow Jones industrial average fell 6.33 points to close at 10,707.70. The blue-chip index sputtered throughout the session, rising as many as 47 points and sinking as many as 30 from Friday's close.
Broader stock indicators were also lower. The Standard & Poor's 500-stock index fell 2.49, to 1297.80, and the Nasdaq composite index fell 28.99, to 2518.98.
The Dow is now 4.5 percent below its record high, set just last month, and the Nasdaq is 12 percent below its record, also set in July. Analysts are divided over whether the market's protracted sluggishness signals a broad correction, or if it is merely a step back from prices that had soared too high, too fast. Wall Street considers a drop of 10 percent to be a correction, or a pause in a rising market.
Arthur Hogan, chief market analyst at Jefferies & Co., said it is unlikely that the market will break out of its trading range until Aug. 24, when the Federal Reserve is expected to raise interest rates for a second time this summer, hoping to slow the growth of the nation's economy to a noninflationary pace.
"Their move is in the bag," he said. "But until they make that move, we'll see a lot more of this sideways action."
Fears of higher interest rates have pressured stocks and bonds for weeks, and bond prices plunged sharply today, sending yields sharply higher. The yield on the 30-year Treasury bond climbed to 6.23 percent--the highest level since Nov. 4, 1997--from 6.17 percent on Friday. The bond's price fell $7.19 for each $1,000 invested.
With yields rising, bonds are becoming an attractive, less volatile alternative to stocks. "Stocks can no longer count on a strong economy and lower interest rates," said Sung Won Sohn, chief economist at Wells Fargo. "Rising interest rates will damage economic growth and earnings expectations."
Russian President Boris Yeltsin kept world markets slightly off balance today after he fired his prime minister and the entire cabinet. It's the fourth time in 17 months that he has dismissed the government.
While the broad market sputtered, a flurry of deals and new products spurred some gains for computer-related companies. Advanced Micro Devices rose 1 7/8, to 19 1/4, after releasing a new computer microprocessor it says can outperform Intel's high-end chip.
Net2Phone, a company that provides telephone service over the Internet, rose 3 7/8, to 20 3/8, after NBC agreed to take an ownership stake in exchange for prominent placement of Web site links.
Data General rose 4 1/4, to 17-7/16, after agreeing to be acquired by EMC, a larger rival in the computer data-storage business. EMC fell 3, to 57.
MCI WorldCom fell 3-13/16, to 77-7/16, after saying it will offer evening long-distance service for 5 cents a minute, matching a plan by rival Sprint. Analysts fear the price cuts eventually will harm earnings.
Oil and oil services shares were mostly higher as the price of crude oil rose. Chevron rose 13/16, to 96 5/8.
Declining issues outnumbered advancing ones by 3 to 2 on the New York Stock Exchange. Volume totaled 684.4 million shares, down from 763.8 million on Friday.
The NYSE composite index fell 0.58, to 610.46; the American Stock Exchange composite index fell 0.05, to 777.87; and the Russell 2000 index fell 2.15, to 425.89.