Wall Street failed to rally all the way back from early losses Thursday as fears of another interest-rate increase checked equity buying.
After its stunning 75-point turnaround Wednesday, the Dow Jones industrial average finished down 7.32 points at 3824.42. It had been down as much as 22.79 points in early trading. The Nasdaq index rose a slim 1.11 points to 784.58 on strength in computer and semiconductor stocks.
Some analysts were looking for the Federal Reserve Board to act as early as Friday to raise short-term interest rates, following up on the quarter-point increase Feb. 4, the first in five years.
Analysts will watch closely Friday’s release of employment figures for signs of greater-than-expected economic strength, which could justify fears of renewed inflation.
The number of non-farm jobs in the economy is forecast to have grown 140,000 in February, after a gain of 62,000 in January, according to a survey of economists by Bloomberg Business News. Anything stronger than that could knock the stock market off its already shaky feet.
“The Fed might act tomorrow,” said David Butler, head of equity trading at Chicago-based Kemper Securities. “There’s a lot of question marks about if they will or not. They acted on a Friday last time, and everything is in place for them to act. But is the timing right?”
“The markets are probably still in a downward trend,” Butler said, even if the Fed doesn’t take immediate action, because investors fear faster growth will translate into a jump in inflation.
The benchmark 30-year Treasury bond slumped in value Thursday, resuming its upward rate climb. It finished the session with a yield of 6.86 percent, up from 6.77 late Wednesday.
Semiconductor stocks generally were up after the Clinton administration decided to bring back to life the Super 301 trade law, a measure allowing the U.S. to take retaliatory steps against nations it decides engage in unfair trading practices. Though the law is general, the intent is specific.
Super 301 is aimed at Japan. That was its target when it was in force in 1989 and 1990, and that was the Clinton administration’s focus in reinstituting it now.
But it’s one thing to have the weapon and another to use it. With a weak coalition government in Japan, there is a question about how effective a truly tough stance by the U.S. would be.
Japanese Prime Minister Morihiro Hosokawa has been unable to sustain trade negotiations with the U.S. or to get a strong political and economic reform package through his legislature. But the Clinton administration has talked tough on Japan since coming to office, and now it has the means to enforce its rhetoric.
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The U.S. semiconductor industry, which has returned from near oblivion in the 1980s to capture half the world market, expects to gain in further penetration of Japan’s market. Intel rose $1.37, to $68; National Semiconductor gained $1, to $23.25; and Integrated Device Technology picked up $1, to $28.25.
Helping those stocks along was a rally in computer issues after Dell Computer surprised analysts with better-than-expected earnings. Dell gained $2.12, to $27.
But the general landscape was littered with casualties.
Drug, beverage, telephone, household-product and bank stocks were losers. AT&T lost 50 cents, to $51.25; Telephone and Data Systems dropped 62 cents, to $44.62; and General Instrument lost 75 cents, to $44.87.
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There seems to be a gap between Wall Street and Main Street, and that’s not news.
While Wall Street has gotten the jitters, Main Street hasn’t lost the urge to shop. Retail stores reported generally good sales for February despite winter weather that included record-breaking snow in Chicagoland.
Best Buy gained $4.25, to $58.75, after it reported that same-store sales, those at stores open at least a year, rose 35 percent. Starbucks, the coffee vendor, lost 12 cents, to $22.87, after it reported a 9 percent same-store sales gain.
Among Chicagoland retailers, some of which did not report sales Thursday, Spiegel rose 25 cents, to $47.62, and Sears lost 12 cents, to $47.62.