Stocks Slip on Fears of Bond Troubles

Stocks drifted lower Thursday as investors, concerned that the finish of this week’s big Treasury auction might jar the bond market, hung to the sidelines and locked in some profits from the past week’s gains.

The Dow Jones industrial average slipped 5.18 points to 5,713.49. It recovered from an earlier loss of 33 points as the bond market held firm to most of the last week’s gains and kept long-term interest rates below the 7% mark.

“The stock market has been waiting for the auction to get out of the way and make sure there are no disasters,” said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee.

Broad stock indexes were mostly lower as well, but modestly so. The Nasdaq composite index was off 3.60 points to 1,137.51. On the New York Stock Exchange winners actually had a tiny edge over losers in relatively slow trading.

Bond yields had edged up by early afternoon amid the usual jitters about the market’s ability to absorb a big new supply of bonds from the federal government’s periodic debt refinancing.

The yield on existing 30-year Treasury bonds--a key influence on corporate and consumer borrowing costs--rose as high a 6.80% at midday. But after the Treasury’s auction of $10 billion in new 30-year bonds, the final phase of the quarterly refinancing, bond yields slipped again. The new bonds were sold at an average yield of 6.77%.

“They’ve been saying all week that the auctions haven’t gone real well, but the bond market really acted terrific despite the rhetoric of the last three days,” said Berman.

Despite the sigh of relief in the bond market, many stock investors were inclined to wait for Friday morning’s report on July wholesale inflation before buying more aggressively, Berman said.

Investors are hoping the inflation report will reinforce last week’s indications of a decelerating economy and modest inflation, which helped drive bond yields lower and power the stock market’s rebound from its sharp July sell-off.

Among Thursday’s highlights:

* Technology stocks were mixed, with semiconductor issues giving back some of their recent gains ahead of an industry report released after the close of trading.

The Semiconductor Industry Assn.’s book-to-bill report on new orders was disappointing, analysts said, and could trigger fresh selling in the group.

Before the report was released, Intel fell 1 39/64 from Wednesday’s record high, to 80 3/4. Micron Technology eased 3/8 to 25 1/2, Texas Instruments lost 3/4 to 47 3/4 and Advanced Micro Devices eased 1/4 to 13 7/8.

* Some computer networking stocks, in contrast, were strong. Cabletron Systems added 1 1/2 to 64, Bay Networks leaped 1 5/8 to 24 7/8 and Cisco Systems jumped 1 1/4 to 58 5/8.

* Nokia surged 3 24/64 to 39 56/64 after the Finnish mobile-phone maker showed a clear recovery in second-quarter earnings, despite a weak overall first half.

* Health maintenance organization shares continued to rally after United Healthcare met its own lowered earnings estimates for the second quarter and indicated confidence that profits will rebound in the second half of this year.

United Healthcare rose 1 to 39 1/4, Foundation Health surged 2 3/4 to 29, Oxford Health jumped 1 1/4 to 45 3/4 and Wellpoint Health gained 5/8 to 27 1/4.

* Procter & Gamble helped depress the Dow index, falling 2 7/8 to 87 7/8 after the consumer products giant’s quarterly earnings report showed a 17% rise in profit but a mere 1% rise in sales, creating questions about future growth. Among other consumer issues, Gillette lost 1 to 62 1/2, Dial was off 1 1/2 to 27 7/8 and Clorox eased 3/8 to 90.

* Roto-Rooter shot up 5 to 41 1/2 after Chemed said it was starting an $88 million, or $41-a-share tender offer for shares of the provider of sewer, drain and pipe cleaning services it does not already own. Chemed rose 1/8 to 38 1/8.

* Among Southland issues, home-equity lender Aames Financial jumped 2 1/4 to 46 1/8 on a strong earnings report. 99 Cents Only Stores rose 1 3/4 to 15 1/8 after it reported quarterly earnings up 44%. But Quiksilver dove 5 7/8 to 20 1/8 after reporting slower-than-expected U.S. clothing sales in the quarter just ended.

* Among new issues, Los Angeles-based apparel maker Guess sold 7 million shares at 18 each. The stock also closed at that level on the NYSE.

Another new issue will make its debut today: Brokerage Hambrecht & Quist priced its 3.5-million share offering at 16 a share. The stock will begin trading on the NYSE today.

In commodity trading, soybean futures rose sharply after substantial rainfall eluded the immature plants in the Midest, increasing the chances of a small harvest at a time of extremely low global supplies.

Market Roundup, D6