Airline issues sold off sharply in an otherwise mixed and drifting stock-market session Thursday.
The Dow Jones average of 30 industrials, down about 7 points at its midday low, closed with a loss of 1.99 at 1,228.69.
Volume on the New York Stock Exchange came to 113.55 million shares, against 135.52 million Wednesday.
The airline stocks hit a decline after American Airlines announced a broad discount-fare plan, raising the prospect of new price competition in the industry. Many of American's competitors said they would match its new fares.
Shares of American's parent company, AMR, tumbled 1 7/8 to 35 after a delayed opening and led the active list on turnover of nearly 4 million shares.
UAL fell 2 3/8 to 45, Delta Air Lines fell 2 to 43, USAir Group fell 1 to 35, Piedmont Aviation fell 1 3/4 to 33 1/2, NWA fell 1 1/2 to 43 and Trans World Airlines fell 5/8 to 11 1/2.
Among aircraft manufacturers, Boeing dropped 1 7/8 to 57 3/4 and McDonnell Douglas fell 1/2 to 72 1/2 amid some conjecture that new problems for the carriers might slow orders for new planes.
The weakness in the airline issues sent the Dow Jones average of 20 transportation stocks down 10.52 points to 584.70.
A few minutes after trading got under way, International Business Machines reported fourth-quarter earnings of $3.55 a share, up from $3.06 in the last three months of 1983.
The company's earnings, which are closely watched on Wall Street because of the preeminent position of IBM stock in the market, came in above most advance estimates on Wall Street, which generally were in the $3.40-to-$3.50 range. IBM stock slipped to 123 5/8 after opening at 124 3/8.
Rockwell International dropped 1 1/8 to 30 5/8. The company said it agreed to buy Allen-Bradley, a major manufacturer of factory automation equipment.
Avnet fell 2 to 34 3/4 and Bell Industries lost 1 to 22. The companies separately estimated lower earnings for their latest fiscal quarters.
Bond prices rose, their advance extended in the wake of a report of a smaller-than-expected rise in the nation's money supply.
Federal Funds Rate Falls The Federal Reserve Board reported its M1 measure of the money supply rose by $2.1 billion to a seasonally adjusted $559.4 billion in the week ended Jan. 7 from a revised $557.3 billion the previous week.
Many credit analysts had expected a rise of about $3 billion, and a smaller-than-expected rise could give the Fed more leeway to permit rates to fall further.
The federal funds rate, the interest on overnight loans between banks, traded at 8.3125%, down from 8.375% late Wednesday.
In the secondary market for Treasury bonds, prices of short-term governments rose between 1/8 point to point, intermediate maturities rose between 1/2 point to 26/32 point and long-term issues were up a full point.
In corporate trading, industrials and utilities rose 3/8 point.
Among tax-exempt municipal bonds, general obligations rose 1/2 point and revenue bonds were up point.
Yields on three-month Treasury bills rose 1 basis point to 7.74%. Six-month bills rose 1 basis point to 7.96% and one-year bills were off 1 basis point at 8.30%.
Yields on 30-year Treasury bonds fell to 11.50% from 11.61% late Wednesday.