Stocks Cut Mid-Session Losses; Dow Off 5.94
Stock prices retreated Wednesday as interest-rate uncertainties prompted traders to take profits after the market’s recent rise to record highs.
But the market finished well above its mid-session lows, suggesting that the investors’ appetite for stocks had not been completely satiated.
The Dow Jones average of 30 industrials, down about 11 points at midday, closed with a 5.94 loss at 1,303.76.
Volume on the New York Stock Exchange dropped to 101.37 million shares from 130.15 million Tuesday.
Caused Excitement
The Dow Jones industrial average’s rise through the 1,300 level earlier in the week caused a great deal of excitement.
However, analysts noted that the average, representing a relatively narrow sample of stocks, was just catching up with other, broader indicators that had already reached new peaks.
“The market has come a long way in a short period of time,” observed Newton Zinder at E. F. Hutton.
Brokers also pointed out that interest rates, whose sharp decline helped fuel the recent rally in stock prices, had stopped falling. In the credit markets Wednesday, prices of long-term government bonds, which move in the opposite direction from interest rates, showed losses ranging to $5 for every $1,000.
Henry Kaufman, chief economist at Salomon Bros., said in a speech prepared for delivery Wednesday that he believes that interest rates will turn upward as the pace of economic activity picks up.
“The slowing of the economy, which was most pronounced in the first quarter, is about over,” Kaufman said. “As money-market rates end their fall within the next month or so, the ebullience in the long-term bond market will abate.”
Bank Stocks Hit Selling
Bank stocks, which have been especially strong of late, ran into some selling. J. P. Morgan dropped 3/4 to 51 3/8, Chase Manhattan 1/2 to 59 3/8 and BankAmerica 3/8 to 21 1/2. Citicorp was unchanged at 48 7/8.
Among actively traded blue-chip industrials, International Business Machines was down 3/8 at 132 5/8, American Telephone & Telegraph was off 3/8 at 23 5/8 and Eastman Kodak fell 1/8 to 43 3/4.
Trans World Airlines rose to 17. A group headed by financier Carl C. Icahn, which has bought about 25% of TWA’s stock, said Tuesday that it planned to offer $18 apiece for the rest of the outstanding shares.
Unocal, which fended off a hostile takeover attempt by a group controlled by T. Boone Pickens Jr., closed down 1 at 34 7/8.
McDonald’s, which raised its quarterly dividend from 20.5 cents to 22.5 cents a share, gained 3/4 to 65, trading at record highs.
In the daily tally on the Big Board, declining issues outnumbered those advancing by more than two to one.
In the bond market, prices fell for the second consecutive session in what was attributed to profit taking.
Meanwhile, the Treasury Department sold $9 billion in two-year notes at the lowest yields in nearly five years.
The average yield was 9.13%, down from 9.81% on the previous two-year note issue of April 30 and the lowest since 8.97% on July 31, 1980. The Treasury said it received $22.7 billion in bids for the notes.
