Dow Off 7.05 as Stocks Continue to Retreat

The stock market posted its second straight loss Thursday, continuing its retreat from the record highs that it reached early in the week.

Bank stocks were the most prominent targets of sellers in a moderately active session.

The Dow Jones average of 30 industrials fell 7.05 to 1,296.71, bringing its loss to 12.99 points since it reached a record closing high of 1,309.70 on Tuesday.

Volume on the New York Stock Exchange came to 101 million shares, against 101.37 million Wednesday.

Declined on Rumors

Bank stocks fell on rumors, unconfirmed as of the close of the exchange, that Argentina was considering nationalizing its banks. Citicorp dropped 1 3/4 to 47 1/8, Chase Manhattan 1 to 58 3/8, Manufacturers Hanover 1 1/2 to 38 7/8 and BankAmerica 3/8 to 21 1/8.

Otherwise, analysts said, many investors were cautiously evaluating prospects for further declines in interest rates after the Federal Reserve’s reduction of its discount rate last Friday from 8% to 7.5%.

One brokerage-house report published Wednesday contained commentaries from two different analysts under the headings, “rates will move even lower” and “rates have bottomed near term.”

Henry Kaufman, chief economist at Salomon Bros., said Wednesday that he expects interest rates to 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.”

In the credit markets Thursday, rates on Treasury bills and bonds showed mixed and small changes.

Phibro-Salomon fell 1 3/4 to 40 in active trading. A company that holds a large block of Phibro-Salomon stock reported plans to sell 10 million of its shares through a public offering.

AT&T; Drops

Among actively traded blue-chip and technology issues, American Telephone & Telegraph dropped 1/2 to 23 1/8, International Business Machines fell 1 to 131 3/8 and Hewlett-Packard declined 1 to 32.

Upjohn climbed 6 3/4 to 108 3/4. There has been considerable excitement lately on Wall Street about the company’s drug minoxidil, for which it is seeking regulatory approval to market as a treatment for baldness.

Katy Industries tumbled 12 3/4 to 22 7/8 amid evident disappointment on Wall Street over the terms of an agreement for Katy to sell its Missouri-Kansas-Texas Railroad subsidiary to Union Pacific for about $108 million.

The daily count on the Big Board showed about three issues declining in price for every two that rose. The exchange’s composite index lost 0.52 to 108.47.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 119.60 million shares.

Large blocks of 10,000 or more shares traded on the NYSE totaled 1,901, compared to 2,044 on Wednesday.

Standard & Poor’s index of 400 industrials fell 0.93 to 208.04, and S&P;’s 500-stock composite index was down 0.96 at 187.60.

Indexes Fall

The NASDAQ composite index for the over-the-counter market dropped 0.88 to 292.15.

At the American Stock Exchange, the market-value index closed at 229.47, down 1.76.

The Wilshire index of 5,000 equities closed at 1,931.417, down 8.911.

Bond prices finished narrowly mixed amid uncertainty about whether the economy is about to pick up steam.

The bond market moved sharply higher Monday in response to declines in interest rates, but the rally faded as speculation arose that the declines could stimulate the slow-growing economy.

While a rebound would be good for industry, it would hurt the bond market by encouraging more private borrowing.

Bernard Schoenfeld, economist for Irving Trust in New York, said he expects economic growth to accelerate in the current quarter in comparison to the 0.7% rise in the first quarter. He said he expects a 3.5% rise in economic growth for the year.

Little Reaction Shown

But others have argued further declines in interest rates are needed to stimulate more rapid economic growth.

The market showed little reaction in the wake of the Federal Reserve’s report late Thursday that the nation’s basic money supply nudged up $100 million in the week ended May 13.

In trading in Treasury bonds, prices of short-term maturity issues were off 2/32 point, intermediate governments were up 6/32 point, and long-term issues were up 9/32 point, according to Salomon Bros.