American equity markets were closed on Good Friday when Washington released employment statistics showing that almost 500,000 jobs were created in the US last month. However, US bond prices declined and did so again yesterday, pushing the yield on the bellwether 30-year long bond up to 7.42 per cent - roughly where it stood when President Clinton took office at the beginning of last year.
Inflation fears were therefore uppermost in the minds of many traders when the market opened yesterday, and the Dow Jones Industrial Average lost more than 80 points in the first 15 minutes of trading. The frantic selling caused the New York Stock Exchange to limit computer- arbitrage trading for the sixth consecutive session.
Prices had stabilised by midday as speculators bought on what they considered a temporary decline. But they plummeted again an hour before the end of the session, forcing the exchange to reintroduce the programme-trading 'collar' - the second time that has happened since the slide began a week ago. Late in the day, the Dow Jones index was down 52.11 at 3583.85.
While the volatility did not fulfil some of the most dire predictions made over the holiday weekend - some managers spoke of a 300-point decline in the Dow - it does leave the Dow Jones Industrial Average 400 points below the record high it set in January, a decline of almost 10 per cent.
In the bond markets, the only economic statistics released yesterday - relatively flat readings of both US consumer confidence and corporate purchasing - failed to convince traders that another hike in interest rates is not imminent.
President Clinton's economic advisers, who had seemed almost sanguine about the sell-off last week, challenged notions that inflation might be spiralling out of control. Robert Reich, the US Labour Secretary, appeared on a business-news cable television channel at midday to explain the Friday employment report and defend the administration's inflation estimates for the year, which say prices will rise by only 3 per cent in 1994. Although the addition of 465,000 jobs in March was 'healthy', he said, it was not inflationary and showed that the US recovery was 'back on track' after a difficult winter.
Yesterday's selling hit shares in all sectors, although the Nasdaq index - which measures smaller over-the-counter issues - was harder hit than the big Dow group.
Tokyo share prices fell back in light trading on Monday as investors worried about how Wall Street would react to higher interest rates. The US dollar gained against the Japanese yen.
The 225-issue Nikkei Stock Average fell 154.94 points, or 0.81 per cent, closing at 19,122.22. On Friday, it had gained 165.24 points, or 0.86 per cent, closing at 19.277.16.