Dow Slides 184, Extending Slump; Bond Yields Jump

Stocks extended their latest pullback Wednesday as commodity prices and bond yields jumped, bringing the Dow Jones industrial average’s two-day loss to 3.9%.

The Dow slumped 184.90 points, or 1.8%, to 10,232.16, closing near the low for the session and pacing a deep market decline.

The blue-chip index now is less than 20 points above its five-month low of 10,213.48 reached Sept. 29.

In the broad market, losers outnumbered winners by more than 2 to 1 on the New York Stock Exchange and on Nasdaq. The technology-heavy Nasdaq composite index tumbled 2.5%, reflecting disappointment over some major tech companies’ third-quarter earnings.

After rebounding last week, the market has slumped as the worries of recent months have returned to grip Wall Street: fears of higher inflation, higher interest rates, and growing investment competition from commodities and foreign stock markets.

Long-term Treasury bond yields on Wednesday hit two-year highs during trading before pulling back slightly at the close.

The bellwether 30-year T-bond yield ended at 6.27%, up from 6.22% on Tuesday and the highest since 6.28% on Aug. 12.

Analysts said Treasury yields are rising in part because a large batch of new corporate bonds are competing for investors’ dollars and because investors are worried that September inflation data due Friday will show a jump in prices.

Higher inflation could drive the Federal Reserve to raise short-term interest rates again.

A surge in key commodity prices Wednesday only fanned inflation concerns. Crude oil futures in New York rose 76 cents to $23.06 a barrel, continuing to rebound after a recent sell-off.

Coffee futures, meanwhile, leaped 24% to $1.19 a pound on worries that weather woes in Brazil will slash the coffee crop.

In currency trading, the euro rose to a two-month high of nearly $1.08 amid more signs that Europe’s economic expansion is gaining steam.

“There’s a real sense that global portfolio managers are shifting away from the U.S.,” said David Jones, an economist with Aubrey G. Lanston & Co. in New York. “That’s especially true for stocks, but it’s certainly not helping bonds,” either, he said.

Wall Street had expected that strong third-quarter corporate earnings reports would bring investors back to the U.S. market. But disappointing results from Intel and other firms in recent days have dampened those hopes.

What’s more, earnings expectations are so high that analysts warn that any companies that miss forecasts are in line for harsh punishment in the market.

“Wall Street is expecting phenomenal earnings, and that might already be priced into the market,” said Stephen Shobin, technical analyst at Lehman Bros. “Right now investors seem willing to ignore the good news and embrace the bad.”

In foreign trading, Asian markets slumped Wednesday, with Tokyo shares falling 1.9%. Latin American markets fell with Wall Street. The Mexican market slid 2.4% and the Argentine market dived 2.9%.

Among Wednesday’s highlights:

* Major tech stocks fell in the wake of Intel’s earnings shortfall reported late Tuesday. Intel slid $4.56 to $72.13, though it closed above the low of $71 reached in after-hours trading Tuesday.

Also sliding were Motorola, down $4.56 to $90.38; Xerox, down $1.19 to $29.81; IBM, down $4.94 to $105.06; Computer Associates, down $2.13 to $55.88; and Seagate, off $1.88 to $29.50.

* Internet stocks were broadly lower. EBay dropped $7.75 to $137 and EToys lost $4.50 to $76.25.

* Among other stocks reacting to earnings reports, International Paper rose 69 cents to $49.28, and Fannie Mae lost 94 cents to $65.25.

* Most defense stocks continued to tumble after Raytheon’s earnings warning Tuesday. General Dynamics dived $5.38 to $52.31 and Northrop Grumman slid $2.94 to $56.06.

* Bank stocks slumped as interest rates rose. Bank of America fell $1.69 to $51.88 and Wells Fargo lost $2 to $39.69.

* Consumer growth stocks falling again included Philip Morris, down $1.06 to $32.94; Home Depot, down $2.38 to $71.25; and Coca-Cola, off 88 cents to $49.69.

Retailing stocks in general were sharply lower, including Dayton Hudson, down $2.19 to $65.06, and Wal-Mart, down $2.56 to $51.31.

* The energy sector was a bright spot. Conoco gained $1 to $26.75, BP Amoco rose $1.19 to $55.19 and Apache gained $1.50 to $41.19.

* Some gold stocks rose with gold prices. Barrick Gold shot up $1.44 to $21.75, and Newmont Mining rose $1.31 to $26.94.

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Inflation Sign?

Prices of coffee, gold and oil rose sharply Wednesday, lifting the Commodity Research Bureau’s index of 17 key commodities to its highest level in more than a year. Monthly closes and latest:

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Wednesday: 209.37

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Source: Bloomberg News

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Market Roundup, C8