Dow Ends Its Record Run; Yields Jump

Blue-chip stocks closed with double-digit losses Wednesday as heavy profit taking broke the market’s seven-session run into the record books. Meanwhile, Treasury bond yields rose sharply as a potential signal of inflation weakened a market already pressured by an influx of new government and corporate bonds.

The Dow Jones industrial average lost 21.68 points to end at 5,579.55, backtracking from Tuesday’s record of 5,601.23.

“It’s a very broad pullback and that tells me it’s just a consolidation of an upward move in progress,” said Paul Rabbit, analyst at Oppenheimer & Co.

“It could last a few days, but I don’t think it’s anything serious or the beginning of a 200- to 300-point downturn,” he said.

In the broader market, advancing issues led declines 1,146 to 1,132 on active volume of 416 million shares on the New York Stock Exchange.

Analysts said the rise in yields in the inflation-sensitive bond market, resulting from a jump to a seven-year high in the Commodity Research Bureau index, also helped trigger the selling in stocks. The CRB, an inflation barometer, rose to 250.68, its highest level since January 1989.

It has gained more than 5% from its mid-January lows and the latest rise was sparked by higher energy prices.

The yield on the key 30-year Treasury bond rose to 6.09% from 6.03% at Tuesday’s close.

Meanwhile, the Nasdaq composite index rose 0.81 point to 1,088.03 as the selling eased in high-technology stocks, which figure prominently in that index.

Eugene Peroni, chief technical analyst with Janney, Montgomery Scott, said technology stocks may be bottoming.

“Their behavior is encouraging after some bad news,” he said. “The group hit extreme optimism this summer and now we’re at the extreme pessimism point.”

He also said the Dow transportation index, which posted a big gain, was playing catch-up with the high-flying industrials, a positive development for stocks overall.

“Airline stocks were helped by some brokerage recommendations, but they had been languishing,” Peroni said.

The Dow transportation index rose 18.05 points, or 0.89%, to close at 2,050.72.

Airline stocks firmed after Morgan Stanley upgraded UAL to “strong buy” from “outperform.” UAL surged 8 to 175 7/8, AMR rose 1 1/8 to 82 3/4, Delta added 1/2 to 75 5/8 and USAir was up 5/8 to 17 1/2. TWA rose 1/4 to 12 7/8 after the airline reported its best financial picture in 10 years.

Among Wednesday’s market highlights:

* Wall Street’s concern that the stock market could be headed for a major correction boosted the shares of gold mining companies. Gold is viewed as a hedge investment in times of uncertainty. Among the gainers, Newmont Gold rose 2 5/8 to 57 3/8 and ASA climbed 1 3/4 to 49.

* Helene Curtis shot up 10 3/8 to 69 3/8 after the company agreed to be acquired by Anglo-Dutch Unilever for the equivalent of $70 a share.

* Technology stocks were mixed after getting an early boost from Applied Materials’ stronger-than-expected first-quarter earnings. Applied Materials rose 5/8 to 39. Cirrus Logic shed 3 5/8 to 19 5/8 after forecasting a fourth-quarter loss and revenue below the previous period because of slower-than-expected orders. Intel rose 7/8 to 58, Cisco Systems shed 1 3/4 to 88 1/2 and IBM added 5/8 to 114 1/2.

* NCS Healthcare, which provides pharmacy services to long-term care facilities, soared 5 1/2 to 22 in its first day of trading.

Overseas, London’s FTSE-100 index closed 2.6 points lower at 3,745, and Frankfurt’s 30-share DAX index ended down 6.84 points at 2,427.07. Tokyo stocks ended with solid gains Wednesday, relieved that New York closed flat overnight despite disappointing U.S. semiconductor data. The 225-share Nikkei average closed up 159.36 points, or 0.77%, at 20,943.59.

Australian shares turned in their highest close in two years, spurred by strong buying interest from excited investors after the announcement of Mobil’s planned bid for Ampolex. Sydney’s All Ordinaries index ended 11.1 points higher at 2,300.8.

Gold prices rose as new tensions with China led to some old-fashioned anxiety buying in Taiwan. The precious metal also benefited from fears that Wall Street stocks may be headed for a free fall after the Dow’s seventh straight record close Tuesday.

On New York’s Commodity Exchange, April gold ended $1.40 higher at $406.50 an ounce.

The dollar retreated against most leading currencies as the German mark surged on prospects of an imminent general election in Italy, widespread expectations of steady German interest rates and ongoing worries about European monetary union.

The dollar fell to 1.4644 marks from 1.4728 on Tuesday. It slipped to 106.30 yen from 106.75.

Among commodities, corn prices soared to 15-year highs after Tyson Foods, the pork and poultry giant, bought millions of bushels from an Ohio terminal, providing another signal that supplies are growing short.