Stocks Dip in Short Session; Yields Rise

Stocks edged lower Wednesday in a listless Christmas Eve session, with the Nasdaq composite index dropping below 1,500 points for the first time since July.

There was little conviction to the abbreviated session, however, with many investors taking off for a five-day weekend, and those who did show up choosing to play it safe.

U.S. stocks fell for the second straight day as an agreement by major industrialized nations to help South Korea pay its debts failed to convince investors that U.S. corporate profits will be unscathed by a slowdown in Asia.

The Dow Jones industrial average jumped out to a 48-point gain in early trading, but quickly pulled back and fell 31.64 points to 7,660.13 by the close, trimming its 1997 gain to 18.8%.

Most broad-market indicators also turned lower after an early spurt of bargain-hunting that followed Tuesday’s late sell-off, which sliced 127 points off the Dow.

The Nasdaq composite index, which is dominated by technology shares considered most vulnerable to the economic crisis in Asia, fell 10.38 points to 1,499.53. While still up 16% this year, the index has slid more than 14% from its Oct. 9 peak of 1,745.85.

“It’s common sense not to make a large bet on either side because if something were to happen with the markets closed or fewer participants on the floor, you could see some very exaggerated swings,” said Russ Labrasca, senior vice president at Principal Financial Securities of Dallas.

Several countries, including the U.S. and Japan, said they would join with the International Monetary Fund to speed $10 billion in new loans to South Korea to encourage foreign banks to roll over loans to Korean borrowers.

But the news did little to alleviate worries that Asia’s financial debacle will eat into U.S. corporate profits in 1998.

“The plan is a pittance,” said Wayne Nordberg, a money manager and partner at Lord, Abbett & Co. in New York, which oversees $26 billion.

“This is still going to be a long-term, painful workout, and the implications for earnings of U.S. companies are just beginning to be seen,” he said.

The dollar edged higher against the yen. The dollar closed at 129.85 yen from 129.22 yen on Tuesday.

Bond yields rose for the first time in five days, because the likelihood of South Korea meeting its short-term debt obligations damps demand for U.S. Treasury bonds, which have been used by many institutional investors as a safe haven.

The yield on the benchmark 30-year Treasury bond, which has been hovering at four-year lows, rose to 5.91% from 5.87% on Tuesday.

On the New York Stock Exchange, declining issues led advances by an 8-7 margin on light volume of 265.98 million shares.

In foreign markets, South Korea’s benchmark Kospi index of 775 stocks fell for a third day amid concerns that record interest rates could push many companies into insolvency. The index fell 4.1% after sinking as low as 6.2%. One-week borrowing rates top 30%.

Hong Kong’s Hang Seng index fell 0.3%, while Japan’s Nikkei index gained 0.9%. In Europe, Britain’s FTSE-100 fell 0.7%, France’s CAC rose 0.6% and Germany’s DAX index rose 0.2%.

The U.S. stock market closed at 1 p.m. Eastern time, as it will on Friday.

The bond market finishes trading an hour later each day and both markets are closed today.

Among Wednesday’s highlights:

* Brokerage stocks fell after 30 major companies agreed to pay $910 million to settle a class-action lawsuit charging they colluded to fix prices on the Nasdaq market. Merrill Lynch fell $1.38 to $67.19, Morgan Stanley Dean Witter lost $1.50 to $52.25 and Charles Schwab declined $1.25 to $37.88. All three stocks were at or near all-time highs in early December, but have traded steadily lower since.

* Banks continued to sag as investors worry about their exposure to Asia. J.P. Morgan, which relies heavily on worldwide securities trading, gave up $1.13 to $100.75. Bankers Trust slipped $2.69 to $109.94. Schroder & Co. cut ratings on Citicorp, which lost $2.63 to $120.38, and Chase Manhattan, which shed $1.13 to $104.38.

* Microsoft lost $4.38 to fall to a six-month low of $118.94 amid growing concern about the hard-line attitude the world’s biggest personal-computer software company has adopted in its court battle with the Justice Department.

The stock is trading below its 200-day moving-average line, a key indicator used by technical analysts. In a research report, a Goldman, Sachs & Co. analyst said there will likely be “a cloud over the stock over the next several months.”

* In the technology sector, personal-computer makers were hit. Dell gave up $3 to $77.50, and Compaq dropped 94 cents to $53.63.

* Led by Merck, drug companies gave in to profit-taking. Merck declined $3.25 to $101.19, while Warner-Lambert eased $2.50 to $122.06 and Pfizer fell $1.81 to $70.75.

Gold closed at $296.80, up $2.50 in trading on the Comex division of the New York Mercantile Exchange.