Strong Home Sales Weaken Stocks

A report that new-home sales surged in May derailed investors’ hopes for an interest-rate cut and sent bonds sharply lower on Thursday, but stocks survived relatively unscathed.

The Dow Jones industrial average ended 6.23 points lower at 4,550.56, having recouped nearly all of a 34-point drop posted earlier in the day.

Stocks buckled as the bond market plunged, with the 30-year Treasury down nearly 2 points late in the day, or $20 for each $1,000 invested. Its yield, which rises when prices fall, climbed to 6.64 percent from 6.51 percent on Wednesday.

“The (stock) market’s down because bonds have reversed heavily,” said Joseph Battipaglia, market strategist at the Sterling Advisers money management firm in New York.

But given the ferocity of the bond market’s sell-off, “stocks are not off significantly,” he said.

Declining issues led advancers by about 8 to 7 on the New York Stock Exchange. Big Board volume was moderate at 313.06 million shares, down from 368.05 million on Wednesday.

A host of forces kept stock losses at a minimum, including a sharp recovery in technology issues and optimism about the resolution Wednesday of automotive trade conflicts with Japan.

Some of the stocks that moved substantially Thursday:

NYSE

Georgia-Pacific rose 1 5/8 to 84 5/8.

Scott Paper rose 1 to 49 1/2.

Stone Container rose 3/4 to 20 3/8.

International Paper rose 1 3/8 to 83 1/4.

Thermo Fibertek fell 1/2 to 19 3/8.

Scott Paper shares rose amid rumors that the company would be bought by Procter & Gamble or Unilever. All three parties declined comment, and analysts dismissed the notion. Lehman Brothers initiated coverage of Georgia-Pacific, International Paper, Stone Container and Thermo Fibertek with “outperform” ratings, and Scott Paper with a “neutral” rating.

NASDAQ

VLSI rose 1 3/4 to 28 3/4.

The maker of application-specific integrated circuits late Wednesday unveiled a new processor, the VP23030, designed to develop modular cordless PBX systems and wireless local loop systems using the digital European cordless telecommunications standard.

AMEX

Gaylord Container rose 1/4 to 11 7/8.

Paper stocks rose after Lehman Brothers initiated coverage of a number of paper companies with “outperform” ratings.