Investors take profits on interest rate concerns

U.S. stocks fell Tuesday, led by a plunging NASDAQ composite index, as analysts said bond yields at nearly two-and-a-half year highs dampened the appeal of equities.

And with euphoria over the America Online-Time Warner merger over, the market found none of the support it got Monday, when the NASDAQ had a record point gain on enthusiasm over Internet and media issues.

The NASDAQ Composite Index plunged 128.48, or more than 3 percent, to 3,921.19, the fifth-biggest point loss on record. The Dow Jones Industrial Average dropped 61.12 to 11,511.08 and the S&P 500 Index fell 19.04 to 1,438.56.

Breadth was decisively negative, with decliners on the New York Stock Exchange beating advancers 2,086 to 1,031. Volume at the NASDAQ was heavy, as 1.3 billion shares changed hands.

In other markets, bonds fell while the dollar dropped against the euro but rose versus the yen.

The price of the benchmark 30-year Treasury recently traded down 1 3/32 to 92 29/32. Its yield, which moves inversely to price, rose to 6.67 percent, the highest since Sept. 11, 1997, from 6.59 percent Monday.

The dollar was mixed against the major currencies Tuesday, rising against the yen and falling against the euro.

The dollar was up against the yen at 105.97, up 0.9 percent from the previous close. Meanwhile the dollar was down against the euro at 1.03, down 0.6 percent from the previous close.

Here's a look at the market's performance just after 3 p.m., ET.

Bonds fall as yields rise
Analysts blamed much of the stock weakness on the bond market, where the yield on the 30-year bond rose 6.68 percent. The highest level in nearly two and half years, analysts say, may finally be luring investors from stocks.

The market's drop comes in sharp contrast to the surge Monday, when demand for Internet and media issues following the America Online, Inc. (AOL)-Time Warner, Inc. (TWX) merger helped lift the NASDAQ to a record gain of 167 points, wiping out most of last week's heavy losses.

Many of Monday's winners fell Tuesday.

America Online fell 7 3/8 to $65 1/4. Time Warner, the parent company of CNNfn, fell 7 3/8 to $84 7/8. Yahoo!, Inc. (YHOO), another Monday winner, also faltered. The leading Internet portal dropped 31 1/2 to $405 1/2 ahead of its fourth-quarter earnings announcement expected after the close of trading Tuesday. Analysts surveyed by First Call Corp expect Yahoo! to have earned 15 cents a share.

The fuel behind the Dow
The Dow got some support from Intel Corp. (INTC), which rose 5 7/8 to $91 5/8 after Credit Suisse First Boston upgraded the world's biggest chip maker to "strong buy" from "buy." Similarly, Dow component Coca-Cola Co. (KO) jumped 1 7/8 to $60 11/16 on another Credit Suisse upgrade.

But the Dow was kept in check by losses to General Motors Corp. (GM), SBC Communications, Inc. (SBC) and International Paper Co. (IP), which fell 1 1/2 to $57 despite reporting fourth-quarter earnings above Wall Street forecasts.

Bank One Corp. (ONE) fell 3/8 to $29 7/8 after the nation's fourth-biggest bank warned that earnings for the fourth quarter of 1999 and the full year 2000 will be below Wall Street's expectations.

Other banks also fell. Bank of America Corp. (BAC) lost 1 to $46, and Chase Manhattan Corp. (CMB) dropped 2 5/16 to $69 1/8.

Rocky road ahead?
Analysts say trading could slow in the days ahead as the market awaits figures on December producer prices Thursday and December consumer prices Friday. The government data could give insight into whether inflation is rising fast enough to prompt the Federal Reserve to launch a series of interest rate hikes ahead.

Most analysts expect the nation's central bank to hike its main lending rate by a quarter percentage point in early February. But the outlook is mixed over the need for a half percentage point tightening

Here are the closing market statistics for Jan. 11, 2000:

S&P 500 Index – 1438.67 , - 18.93, (-1.3 percent)
Dow Jones Industrials Average – 11511.70, - 60.50, (-.5 percent)
American Stock Exchange (Amex) Major Market Index – – 1191.63 – .60, (-.1 percent)
Russell 2000 Index – 492.58, - 9.31 , (-1.9 percent)
Russell 1000 Index – 753.11, - 10.99, (-1.4 percent)
NASDAQ – 3922.69, - 126.98, (-3.1 percent)
30-Year US Treasury Bond – 6.67 percent, + 8 basis points, (+1.3 percent)

Economic calendar for Jan. 12, 2000 (economic reports and expected release time):

Producer Price Index (PPI) and Core PPI for December, released at 8:30 AM

Retail Sales for December, released at 8: 30 AM

Initial jobs claims for January 8, 2000, released at 10:00AM

-- Richard Peal in Chicago