GNP Report Depresses Market; Dow Off 7.18

Stock prices gave ground Thursday after an early advance faded, ending a stretch of seven consecutive gains for the Dow Jones industrial average.

Analysts said the positive implications of falling interest rates were offset by a gross national product report that raised concern about a slowing economy.

Dow Jones’ average of 30 blue chips, up 19.33 points over the past seven sessions, fell 7.18 to 1,265.13.

Volume on the New York Stock Exchange reached 100.64 million shares, up from 96.02 million Wednesday.

Before the opening, the government issued a preliminary report that GNP grew at a 1.3% annual rate, after adjustment for inflation, in the first quarter of the year.

Dollar’s Sharp Retreat

That marked a downward revision from the “flash” estimate given late last month of 2.1% and was taken as strong evidence that the economy had lost a good deal of its momentum.

The news touched off a quick drop in interest rates and a sharp rise in bond prices. The U.S. dollar staged a sharp retreat, falling to its lowest level in seven months.

Rates on short-term Treasury bills fell 10 to 20 basis points, or hundredths of a percentage point. Prices of long-term government bonds, which move in the opposite direction from interest rates, climbed about $10 for every $1,000 in face value.

Among individual stocks, the spotlight fell on CBS as Ted Turner, chief executive of Turner Broadcasting, made a complex offer to acquire control of the company through an exchange of stock and debt securities.

CBS shares fell 3 1/2 to 106 as analysts warily appraised Turner’s bid.

RCA, widely discussed as another possible takeover candidate in the broadcasting industry, rose 1 5/8 to 43 7/8.

Tandy dropped 2 1/2 to 31 1/2 in active trading. The company reported that its earnings for the fiscal third quarter ended March 31 fell to 25 cents a share from 60 cents in the comparable period a year earlier.

Texas Instruments, which also came in with sharply lower quarterly profits, tumbled 12 1/2 to 97 5/8.

Auto issues posted broad declines, evidently hurt by fears that the peak of the business cycle had passed. General Motors dropped 2 1/2 to 70 7/8, Ford Motor 1 1/8 to 43 3/8 and Chrysler 1 3/8 to 36 3/8.

Another notable loser among the blue chips was International Business Machines, down 2 1/8 at 127 1/2.

Large blocks of 10,000 or more shares traded on the NYSE totaled 1,990, compared to 1,895 on Wednesday.

Rapid Growth in M1

In the credit markets, bond traders were speculating that the Federal Reserve Board will relax its credit policy in response to the slower pace of economic growth, and that would encourage lower interest rates.

One factor that has militated against an easier Fed policy has been rapid growth in the nation’s money supply.

But late Thursday, the Fed reported that its M1 measure of the money supply contracted by $1.2 billion in early April.

The decline was not as steep as the $2-billion drop expected by many credit analysts, and bond prices slipped from their highs of the day.

But prices still closed with major gains for the day.

For the past two days, a key short-term interest rate has been trading below 8%, a barrier last breached in late December.

The federal funds rate, the interest on overnight loans between banks, traded late Thursday at 7.675%, down from 7.75% late Wednesday.