Stock Traders Warily Eye Bonds

A selloff in the bond market yesterday sparked stocks' slide. Will today bring the Thursday thud?
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Anyone who doubted that stocks are taking their cues from the bond market these days found out how wrong they were yesterday. Painfully.

On the back of

Alan Greenspan's

suggestion that the

Fed

has moved to a tightening bias, yesterday's two-year auction proved pretty hard for the Treasury market to digest. The selling drove the yield on the long bond above 5.5% for the first time since August. And the stocks, which looked like they were on the brink of breaking out of their range, fell.

At 9 a.m. EST, the 30-year Treasury was up 9/32 to 96 16/32. Significantly, that puts the yield at 5.49% -- just below 5.5%, the level that everyone is watching. Will it hold?

"If we rally from here, you could say we had a successful test," said Tony Crescenzi, chief bond market strategist at

Miller Tabak Hirsch

. "But the fact is we're facing a very treacherous road next week. The month of March is a minefield when it comes to indicators."

What reports we've gotten for this month have been flashing economic strength, so there's a real chance that the Treasuries will be in a world of hurt when things like the February

jobs report

come out next week. Crescenzi notes that though bonds have been falling, there has yet to be any real capitulative action yet. Next month could be a very treacherous time to be in Treasuries. Or stocks.

The nervousness in bonds is spilling over to stocks this morning. After early indications of strength, it looks like there will be a bit of weakness at the open. The

S&P 500

futures were up 0.7 -- 2 points below fair value.

A number of companies announcing restructuring plans, and an article in the

Mainichi Shimbun

suggesting that the government may allow corporate pension funds to invest in the stock market, helped Tokyo stocks end higher. The

Nikkei

added 115 to 14,470.45.

Hong Kong stocks edged lower as some of the investors who piled into market heavyweight

HSBC

took chips off the table. The

Hang Seng

dropped 19.5 to 9658.07.

European stocks are still digesting yesterday's decline on Wall Street. In Frankfurt, the

Dax

was off 93.12, or 1.8%, to 4969.19. In Paris, the

CAC

was off 24.72 to 4188.98. And in London, the

FTSE

was off 49.2 to 6258.4.

Thursday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

DaimlerChrysler

(DCX)

posted 1998 net income of $5.7 billion, excluding merger costs, up 29% from the year-ago pro-forma earnings of $4.5 billion.

In a sop to regulators,

Olivetti

relaunched its $58 billion takeover bid for

Telecom Italia

(TI)

.

Reader's Digest

(RDA)

set a cyberspace push, saying it would invest at least $100 million on making strategic investments in Web sites that fit the Reader's Digest brand and strategy. It will also use the company's magazine and direct marketing capabilities to drive traffic to those sites, which it said will be rebranded or co-branded with the Reader's Digest name.

Viacom

(VIA) - Get Report

set a 2-for-1 stock split and said it will move its shares to the

New York Stock Exchange

from the much smaller

American Stock Exchange

, where Viacom was the marquee listing. The media concern posted fourth-quarter operating earnings of 30 cents a share, beating the

First Call

16-analyst view of 13 cents.

In other news (earnings estimates are from First Call):

Merrill Lynch

analyst Steven Milunovich had cautious comments about

Dell

(DELL) - Get Report

in a talk to the firm's sales force,

CNBC

reported.

EMC

(EMC)

set a 2-for-1 stock split.

Gap

(GPS) - Get Report

reported fourth-quarter earnings of 53 cents a share, beating the 18-analyst estimate of 50 cents and up from the year-ago 36 cents.

An advisory panel of the

Food and Drug Administration

yesterday voted not to back

Glaxo Wellcome's

(GLX)

flu treatment drug

Relenza

. The panel doesn't set FDA policy, but the agency generally follows its lead.

Kmart

(KM)

agreed to buy the operating leases, fixtures and equipment of 11 Caldor sites in Massachusetts, New York, New Jersey and Delaware. In January, Caldor, which has been in bankruptcy since 1995, said that it would be liquidating inventory and selling real estate.

J.C. Penney

(JCP) - Get Report

posted fourth-quarter earnings of 72 cents a share, excluding items, falling a penny shy of the 15-analyst estimate and down from $1.22 in the year-ago period, excluding items.

Sports Authority's

(TSA)

February same-store sales rose 16.9%. The company also said it anticipates fourth-quarter earnings will be only "slightly positive," in line with what it forecast in January when it said it saw sales coming in at $450 million.

Waste Management

(WMI)

reported fourth-quarter earnings of 58 cents a share, excluding items, in line with the 11-analyst view and up from the year-ago 16 cents, which excludes items.

Wolverine Tube

(WLV)

posted fourth-quarter earnings of 23 cents a share, in line with the six-analyst view, but down from the year-ago 51 cents.