Thursday's markets: Plunge in bond prices sends stocks skidding
Bond prices tumbled as positive economic news renewed worries of rising interest rates. And the bond market's plunge carried over to stocks, setting off a tidal wave of selling. The dollar rose against most other major currencies.</br></br>The price of long-term Treasury bonds plunged plunged 1 1/8 points, or $11.25 for each $1,000 face amount, driving up long-term interest rates. The Dow Jones Industrial Average fell 36.47 to 3268.69 in very heavy trading. Standard & Poor's 500-stock index lost 3.79 to 430.73, and the Nasdaq Composite Index fell 3.64 to 678.21.</br></br>"The bond market certainly has gone into a nose dive," said Dennis Jarrett, chief market analyst at Kidder Peabody. "It may not be a major negative for the stock market but it sure is putting a damper on things."</br></br>Analysts said the sell-off in bonds was sparked by an unexpectedly large drop in initial jobless claims for the week ended Dec. 26. The improvement in the job picture suggests that the economy is growing faster than expected, raising the specter of higher inflation.</br></br>The drop in bond prices accelerated late in the afternoon as traders began to question President-elect Clinton's commitment to cutting the budget deficit. News reports yesterday said that because of a higher-than-expected deficit left over from the Bush administration, Mr. Clinton may have to move slower on deficit reduction.