Thursday: Stocks Lower in Quiet Trading; Bonds Weak

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By John J. Edwards III and Erle Norton
Staff Reporters

A little more space on the subway, a little less noise on the trading floor -- the pre-Memorial Day slowdown is underway.

As Wall Streeters begin to beat the holiday traffic and get out of town, the equity markets are off on modest volume. The

Dow Jones Industrial Average

continues to test resistance under 7300, while the tech-laden

Nasdaq Composite Index

has drifted slightly lower after two days of strong upward climbing.

"The general impression is it is quiet, but I'm focusing in on the bonds," one trader said. "You've got to keep an eye on the volatility in the dollar. The bonds have entered a very tough period. We're right at 7%" in the 30-year Treasury yield. He noted that the most recent major downturn in stocks, back in late March/early April, was keyed to a decisive move in the 30-year yield above that psychologically crucial threshold.

The dollar is continuing to pick up strength against the yen after its recent weakness, climbing near 116 yen in morning action. While that would normally give bonds a lift, bond traders are concerned about the prospect of an interest-rate boost by the

Bank of Japan

-- and, of course, about the likelihood of a

Federal Reserve

rate hike in July.

Rising interest rates would slam a group that's already taken plenty of hits: consumer lenders.

Beneficial

(BNL)

, one consumer-finance company that's rattled up and down in recent months, has rattled down 1 3/8 to 63 1/2 today after negative comments from

Morgan Stanley

. Analyst Jennifer Oliver Martin downgraded Beneficial to neutral from outperform and cut her 1997 earnings estimate to $5.70 per share from $6. The

First Call

consensus estimate is $5.89, and the consensus rating is buy, according to

I/B/E/S

.

While Beneficial's problems are nowhere near those of troubled lenders such as scandal-plagued

Mercury Finance

(MFN)

or credit-card provider

Advanta

(ADVNA)

, which is struggling with burgeoning delinquency rates, the Wilmington, Del.-based company is encountering several hurdles, Martin said in an interview. Areas of concern at Beneficial include declining asset quality in its private-label credit card business, a low growth rate in its tax refund loans, problems in its German operations and lower-than-anticipated loan growth in Canada, she said.

Martin noted that there are some other companies with strong growth rates in the consumer-finance sector, such as

MBNA

(KRB)

,

Capital One Financial

(COF) - Get Report

and

Green Tree Financial

(GNT) - Get Report

. MBNA is up 1.5% today, but Capital One and Green Tree are trading lower.

Beneficial was the subject of an

April 1 story in

The Street

about heavy insider selling by company executives. The stock closed at 63 3/8 that day, dipped as low as 59 1/2 by April 25 and then rebounded to close at 64 7/8 yesterday. But as of yesterday's close, the shares were off 14.4% from their March 10 high of 75 3/4.

Finally,

The Street

joins conscientious TV fans everywhere in lamenting that

Susan Lucci

was robbed at the Daytime Emmy Awards for the 17th time. You'll get 'em next year, Erica!