NEW YORK — NEW YORK -- U.S. stocks, bonds and the dollar skidded yesterday after a report showing brisk manufacturing growth prompted concern the Federal Reserve will soon raise interest rates to curb inflation.
"The general consensus is that the economy is growing faster than expected and rates are going to go much higher," said Philip J. Orlando, money manager at First Capital Advisers, with assets of $100 million.
U.S. financial markets swooned after the National Association of Purchasing Management (NAPM) said its prices-paid index rose to a six-year high of 79.9 in October from 77.1, showing that more manufacturers reported paying higher prices last month than in September.
The NAPM also said its overall activity index rose to 59.7 from 58.2, the 14th consecutive monthly increase. Separately, the Commerce Department said construction spending rose a larger-than-expected 1.6 percent in September, the biggest gain in six months.
The reports sent the yield on the benchmark 30-year Treasury to 8.06 percent, up from 7.98 percent Monday. The bond's price tumbled 29/32, or $9.06 per $1,000 bond, the biggest loss since yields rose 10 basis points Oct. 20 after a report of strong September housing starts.
The Dow Jones industrial average slid 44.75, to 3,863.37, as three rounds of computer-guided "sell" orders sliced 20 points off the average. Union Carbide Corp., Caterpillar Inc. and DuPont Co. were the largest decliners.
In the broader market, the Standard & Poor's 500 index slid 3.93, to 468.42. Oil and chemical producers, as well as regional banks, led the index downward. The Nasdaq combined composite index declined 5.30, to 772.19, led by losses in Tele-Communications Inc., Biogen Inc. and Intel Corp.
If reports of rapid economic growth encourage the Fed to raise rates "even more than anticipated" at its Nov. 15 policy council meeting, "that's going to make people uneasy about owning stocks," said Joseph DeMarco, managing director for equity trading at HSBC Asset Management, a unit of Hongkong & Shanghai Bank.
By making bonds relatively more attractive than stocks, raising companies' and consumers' financing costs and slowing the economy, "rising interest rates are by and large not good for the stock market," he said.
Concern about rising inflation helped to push the dollar close to a post-World War II low against the yen. The purchasing management report "destroyed the notion that we can have strong growth without inflation," said Tom Hoge, vice president and currency trader at the Bank of New York.
The dollar fell as low as 96.49 yen after the report was released, just above a postwar low of 96.42 yen, set Oct. 25. It was last quoted at 96.62 yen, down from 96.96 yen Monday. The dollar was last quoted at 1.4956 German marks, down from 1.5032 marks yesterday. It fell to 1.4955 marks after the NAPM report.
This morning in Japan, the U.S. currency opened at an all-time Tokyo low of 96.51 yen, despite intervention by the Bank of Japan before trading opened.
Among the big losers yesterday in the stock market, Atlantic Richfield dropped $1.25, to $107.125; Mobil fell $3, to $83; Exxon declined $1.125, to $61.75; Texaco Inc. dropped $1.50, to $63.875; Royal Dutch Petroleum Co. slid $2.25, to $114.25; and British Petroleum PLC American depositary receipts, each standing for 12 common shares, dropped $1.75, to $83.
Biogen plummeted 18 percent, dropping $9, to $40. The biotechnology company took a $25 million pretax charge to halt development of Hirulog, one of its two most important experimental drugs, after it failed human tests.
Among other biotech stocks, Genzyme Corp. eased 50 cents, to $32.25; Amgen Inc. dropped 87.5 cents, to $54.875; and Chiron Corp. gave up $2.625, to $64.75.
Chemical, paper and lumber stocks also weakened. "There has been a disillusionment in recent weeks with basic industry issues, based on the belief that the rate increases so far are going to slow economic growth," said Thom Brown, money manager at Rutherford, Brown & Catherwood Inc. in Philadelphia.