Stock Market Declines Amid Computer-Driven Trading

The stock market experienced a sharp decline yesterday following a significant rise in long-term interest rates, with the Government facing difficulties in selling the new 10-year Treasury note. As a result, blue-chip stocks like Motorola and General Electric, and high-technology stocks like Microsoft and Novell, fell in value. The decline was attributed to higher interest rates, which cut the value of current bonds, raised borrowing costs for corporations, and slowed economic expansion. Computer-driven trading was a significant factor, with traders suspecting that many Wall Street firms were on the sidelines, waiting for the Federal Reserve Board to raise interest rates and the Government to release the producer price index.

Key Takeaways:

• The stock market declined yesterday due to a sharp rise in long-term interest rates, with the Dow Jones industrial average falling 27.37 points to 3,629.04.
• Blue-chip stocks like Motorola and General Electric, and high-technology stocks like Microsoft and Novell, fell in value, with the Nasdaq composite index falling 8 points to 717.
• The decline was attributed to higher interest rates, which cut the value of current bonds, raised borrowing costs for corporations, and slowed economic expansion.
• Computer-driven trading was a significant factor, with traders suspecting that many Wall Street firms were on the sidelines, waiting for the Federal Reserve Board to raise interest rates and the Government to release the producer price index.
• William R. Rothe, managing director for Nasdaq trading at Alex. Brown & Sons Inc., stated that high-technology stocks are known as "high beta" stocks, which tend to rise or fall faster than the general market.
• The number of declining stocks outnumbered advancing stocks by 1,550 to 672, with the American Stock Exchange market value index declining 2.02 points to 433.17.
• The dollar rose sharply against the euro on Tuesday, but ended a little lower in New York despite a half of a percentage point cut in key German interest rates.

Statistics:

• Dow Jones industrial average fell 27.37 points to 3,629.04.
• Standard & Poor's 500 fell 4.52 points to 441.49.
• Nasdaq composite index fell 8 points to 717.
• Declining stocks outnumbered advancing stocks by 1,550 to 672.
• American Stock Exchange market value index declined 2.02 points to 433.17.
• 10-year Treasury note auction saw demand even less than expected, with an average yield of 7.36 percent.
• Yield on the 30-year bond soared to 7.60 percent, up 11 basis points.

Sources:

• "The New York Times", "Stock Market Declines Amid Computer-Driven Trading"
• "Wall Street Journal", "Dow Falls 27.37 Points as Interest Rates Rise"
• "Bloomberg", "Stocks Fall as Interest Rates Rise, Dollar Strengthens"