Computer, Technology Stocks Lead Market to Biggest Loss This Year
The stock market sustained its largest loss of the year Thursday in selling blamed on increasing concern about the outlook for corporate earnings.
International Business Machines and several other computer and technology stocks led the market’s retreat for the second straight day.
The Dow Jones average of 30 industrials tumbled 16.24 to 1,290.10 for its biggest drop since it fell 18.22 points last Nov. 16. The Dow lost 7.50 points Wednesday. Thursday marked the first time that the Dow has closed below 1,300 since May 23.
Volume on the New York Stock Exchange Thursday stepped up to 107.03 million shares from 97.70 million Wednesday.
The market fell Wednesday as IBM withdrew its previous projection of “solid growth” for 1985 after some earnings weakness in the first half of the year. IBM shares, which tumbled 5 points Wednesday, lost another 2 1/8 to 118 3/8 in Thursday’s trading.
But several brokerage houses, while cutting their 1985 estimates on IBM, are recommending the stock at its current levels. Agreeing that the company’s fundamental position within the computer industry continues to strengthen, several analysts are recommending purchase for the long term.
Among other computer and technology issues, Digital Equipment dropped 2 to 91, Data General 1 3/4 to 32 5/8 and Control Data 1 3/4 to 26. Control Data said Wednesday that it had shelved plans to sell its Commercial Credit subsidiary.
Analysts said IBM’s negative appraisal of the outlook raised doubts on Wall Street about profit prospects for many other companies.
The latest data on retail sales also appeared to be creating uncertainty. The Commerce Department reported that sales fell 0.8% in May for their sharpest decline since last July.
In the daily tally on the Big Board, declining issues outnumbered advances by about five to two. The exchange’s composite index lost 1.18 to 107.69.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 131.87 million shares.
The Wilshire index of 5,000 equities closed at 1,915.846, down 19.909.
Standard & Poor’s index of 400 industrials fell 2.65 to 204.53, and S&P;’s 500-stock composite index was down 2.28 at 185.33.
The NASDAQ composite index for the over-the-counter market dropped 2.73 to 286.93.
At the American Stock Exchange, the market-value index closed at 224.89, down 1.53.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,091, compared to 1,939 on Wednesday.
Bond prices wound up little changed after trading lower for most of the session. Prices of some long-term bonds bounced back from their lows of the day after the Federal Reserve Board reported a smaller-than-expected $800-million rise in its M1 measure of the money supply.
In secondary trading, yields on three-month Treasury bills fell 15 basis points to 6.92%, while six-month bills fell 8 basis points to 7.10%. One-year bills fell 8 basis points to 7.27%. A basis point is one-hundredth of a percentage point.
Yields on 30-year Treasury bonds slipped to 10.45% from 10.46% late Wednesday.
In the secondary market for Treasury bonds, prices of short-term governments rose 6/32 point, intermediate maturities were up 2/32 point and long-term issues were up 1/32 point, according to the investment firm of Salomon Bros.
A point represents a change of $10 for every $1,000 in face value of a bond.
In corporate trading, industrials and utilities were unchanged.
Among tax-exempt municipal bonds, general obligations were unchanged, while revenue bonds fell point.
The federal funds rate--the interest charge on overnight loans between banks--traded at 7.438%, up from 7.313% late Wednesday.
