Stocks Fall; Bonds Take a Beating;Nervous Market Pushes Dow Average Down 8.93 Points
The stock market suffered new losses yesterday after a day of nervous gyrations, but the major damage was in the bond market, where a sharp sell-off occurred as Treasury bond interest rates rose to almost 9.5 percent-their highest level since early last year.</br></br>The Dow Jones industrial average, the stock market's key indicator, closed at 2602.04, down 8.93 points. The Dow, which spent most of the day on the minus side, was off as much as 29 points at 2 p.m. but recovered somewhat by the close of trading.</br></br>The bond market was the focal point of yesterday's action as the price of the bellwether 30-year Treasury bond fell $17.50 for every $1,000 of face value, raising yields to almost 9.5 percent. The bond's price dropped $11.50 per $1,000 on Tuesday. Bond prices and interest rates move in opposite directions in order to adjust the yield of older bonds to make them competitive with newer bonds.</br></br>Market analysts said the fall in bond prices was based on continued weakness of the dollar in global currency markets and signs of growing strength in the nation's economy. The bond market interprets both events as the forerunners of tighter money policies, higher interest rates and losses in the value of bonds.</br></br>In the currency markets, the dollar fell below 141 yen and below 1.8 West German marks. Analysts said a weak dollar raises fears among investors that the Federal Reserve will have to boost interest rates to bolster the currency.