Newspaper article THE JOURNAL RECORD

Weak Dollar, Bond Market Spur Dow Industrials Decline

Newspaper article THE JOURNAL RECORD

Weak Dollar, Bond Market Spur Dow Industrials Decline

Article excerpt

NEW YORK (AP) - The stock market fell steeply Tuesday in reaction to a weak dollar and bond prices, but most dealers welcomed the selloff as a much-needed rest from a lengthy rally that produced many overpriced shares.

The Dow Jones average of 30 industrials, which closed above the 2,700 mark for the first time on Monday, tumbled 45.91 to 2,654.66 - its seventh largest daily drop.

The losses were felt across the board. Declining issues outpaced rising stocks by more than 3 to 1 on the New York Stock Exchange, with 1,296 down, 393 up and 312 unchanged.

Big Board volume came to 198.40 million shares, up from 166.12 million in the previous session.

Traders blamed sharp drops in the dollar and bond prices for Tuesday's market pullback. The dollar's weakness was largely a continuing reaction to Friday's trade report, which showed the nation's shortfall in its trade balance widening to $15.7 billion.

A weak U.S. currency makes dollar-denominated securites, such as stocks, less attractive to foreign investors. Lower bond prices mean a rise in interest rates, and that could increase the attractiveness of debt securities over stocks.

But traders said investors merely used the dollar as an excuse to sell following several weeks of sharp gains in stock prices, fed, in part, by a hungry appetite for equities by foreigners.

``I think it (the market) is overvalued, not just historically but relative to the alternatives, such as cash and bonds,'' said John D. Connolly, chairman of the investment committee at Dean Witter Reynolds Inc.

Before Tuesday, the Dow Jones industrial average - the best-known measure of market trends - had risen 804.62 points, or 42.44 percent, from the start of the year. On Monday, the index gained 15. …

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