NEW YORK -- U.S. stocks slumped yesterday as Treasur bond yields climbed to their highest level in 10 months and concern grew about President Clinton's involvement in the Whitewater affair.
"Pressure from the bond market keeps weighing on the stock market," said Thomas Gallagher, head trader at Oppenheimer & Co. The yield on the benchmark 30-year bond closed at 6.96 percent, up 12 basis points and its highest level since May 1993.
The Dow Jones industrial average declined 22.79, to 3,830.62, closing at its lowest level since Jan. 7. Shares of Aluminum Co. of America and International Paper Co. led the decline.
The Standard & Poor's 500 Index fell 3.16 to 463.90, the Nasdaq Combined Composite Index plunged 3.95 to 789.09, and the American Stock Exchange Market Value Index declined 2.01 to 464.78.
Twelve common stocks fell for every five that rose on the New York Stock Exchange. Trading was active, with about 333 million shares changing hands on the Big Board.
The rise in long-term interest rates hurt stock prices, traders said. Treasury bond yields rose after Treasury Secretary Lloyd Bentsen told a House panel that he expects "long-term sustained growth" in the economy for the rest of the decade.
"Bonds are under pressure because of comments from government officials about a stronger economy and gold being so strong," Mr. Gallagher said.
PD Gold for April delivery soared $8.10 an ounce to $388.20. Rising
gold prices are seen as an indicator of accelerating inflation.
Interest rates hold the key for stocks, said James Solloway, research director at Argus Research. "When rates move, stocks follow," he said. "If we see bond yields move past 7 percent, then I would become very concerned."
Stocks also were hurt by concern about President Clinton's involvement in the Whitewater affair, traders said. Special prosecutor Robert Fiske subpoenaed six White House staff members last weekend as part of an investigation into the Clintons' investment in Whitewater Development Corp., an Arkansas land developer. The Clintons' partner in Whitewater owned a failed Arkansas thrift that is the target of a government investigation.
"The specter of a distracted White House, a congressional logjam and the prospect of stalled government leadership is hurting the market," said Alan Ackerman, market analyst at Reich & Co.
But Don Hays, market analyst at Wheat First Butcher & Singer, said traders are simply taking advantage of Whitewater. "Traders are using the Whitewater news as an opportunity to play with the market," he said. "It's all a smoke screen."
Meanwhile, aluminum stocks fell after the International Primary Aluminum Institute reported an unexpected rise in inventories among producers, according to traders and analysts.
Worldwide inventory at the producer level rose to 3.562 million metric tons in January, from 3.498 million in December, said Peter Anker, a metals analyst at NatWest Securities Month.
"This is the first increase after four months of consecutive declines, so it's pretty significant," Mr. Anker said. "The fact that it's a reversal of what you've been seeing is what bothers people."
Alcoa shares fell $1.75 to $73.125, Reynolds Metals Co. declined to $50.50, and Alcan Aluminium Ltd. dropped 12.5 cents to $23.50.
OC Paper stocks also dragged the stock market lower in the wake of
International Paper Co.'s comments Wednesday that analysts' earnings estimates may be too high because of weak paper prices.
International Paper slumped $2 to $69.50, after falling $2.75 Wednesday. Shares of rival Georgia-Pacific Corp. were down $1.375 to $68.625.
Advanced Micro Devices Inc. shares rallied $6 to $28.75, after a federal court jury cleared the semiconductor chip manufacturer of infringing on microcode copyrights held by Intel Corp. Intel fell $1.50 to $70.125.