NEW YORK -- U.S. stocks fell yesterday in a tumultuous session after an unexpectedly strong retail sales report sent bond yields to their highest levels in six weeks.
"Interest rates are the only game in town," said Philip Orlando, chief investment officer at Value Line Asset Management in New York, which oversees about $6 billion. "Companies are finished reporting quarterly earnings. Bonds drive stocks, and when bonds go down, stocks go down."
The Dow Jones industrial average sank 101.27 to 7,960.84, after rising 33 points. The Nasdaq composite index tumbled 10.50 to 1,576.24, giving up a 14-point gain. The Standard & Poor's 500 fell 10.47 to 926.53. Five stocks fell for every four that rose.
Among broad market indexes, the Russell 2,000 index of small capitalization stocks lost 1.22 to 411.42; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, dropped 74.20 to 8,815.90; the American Stock Exchange composite index slipped 1.12 to 643.23; and the S&P; 400 midcap index slid 0.63 to 310.32.
The market reacted, in part, to an LJR Redbook Research retail sales report which renewed concern that economic growth is accelerating and will spur the Federal Reserve to raise interest rates.
That report was issued as traders awaited more influential government reports today on prices paid to factories and other producers and tomorrow on prices paid by consumers.
Analysts blamed the Dow's fall on the unexpectedly strong retail sales report, which sent bond yields to their highest levels in six weeks. That drove bank shares lower.
Banc One Corp. fell $1.3125 to $51.6875; NationsBank Corp. lost $1 to $66.125; and Norwest Corp. declined $1.8125 to $58.8125.
Amgen Inc. tumbled $6.9375 to $50.1875 after the biotechnology company said profit is being hurt more than expected by new federal rules affecting insurance reimbursements for Epogen, one of its two drugs.
Other drug stocks also slumped after the Wall Street Journal pointed out that patents for several major drugs expire in 2002. A Morgan Stanley Dean Witter report Monday said drug companies are likely to earn less than expected in the second half of the year.
Pfizer Inc. fell $1.6875 to $53.1875; Merck & Co. lost $1.625 to $93.625; and Eli Lilly & Co. fell $1.6875 to $107. Even with the drop, the Standard & Poor's drugs index is up 43 percent in 12 months.
LJR said retail sales climbed a robust 0.9 percent in the month to date from the same period in July. The report came as investors await today's government estimate of July sales and wholesale prices for clues on where interest rates are headed.
"People want to see that the inflation numbers are in check," said Jon Hickman, a money manager with Wells Capital Management of San Francisco. Stocks weren't the only zigzagging securities. The yield on the benchmark 30-year Treasury bond rose 3 basis points to 6.67 percent, after falling 4 basis points earlier after reports on productivity, retail sales and manufacturing.
"The bond market is the key," said Hank Herrmann, chief investment officer at Waddell & Reed Inc. of Overland Park, Kansas, which oversees $28 billion.
Wal-Mart, the world's No. 1 retailer, fell $1.0625 to $35.9375 after reporting second-quarter profit of 35 cents a share, matching estimates. J. C. Penney Co. gained $1.8125 to $59.9375 after reporting profit from operations of 38 cents a share, a penny above expectations.
HFS Inc. rose $1.4375 to $64 after saying it formed a $232 million joint venture with financier Leon Black to buy residential brokerages and convert them to one of HFS's Coldwell Banker, Century 21 or ERA names.
Quick & Reilly Group Inc. shares jumped $2.375 to $31.6875. Bloomberg News reported Monday that the third largest discount brokerage is soliciting bids.
Pub Date: 8/13/97