Market Retreats Late in Session; Dow Off 7
A rebound in technology issues failed to ignite the stock market Wednesday and prices closed mixed, with the Dow Jones industrial average dropping below 1,300.
Oil, steel, auto and airline stocks all retreated to help offset the improvement in the computer sector.
The Dow Jones average of 30 industrials fell 7.39 to 1,297.38. Most of the loss came in the final hour; the measure was up more than 4 points early in the session.
Advances, Declines Even
Overall advances and declines were nearly even on the New York Stock Exchange, whose composite index lost 0.30 to 108.45.
Big Board volume was the heaviest in two weeks, totaling 108.27 million shares, against 106.93 million Tuesday.
Computer stocks, recovering from their recent drubbing, helped the market move moderately ahead in the early going. But the advance failed to gather momentum and, during the closing hour, disappeared completely.
Wall Street has been encouraged by the recent drop in interest rates, including the half-point cut to 9 1/2% in the banking industry’s prime lending rate Tuesday.
But investors are simultaneously worried that the key contributor to the lower rates--the sluggish economy--will reduce the earnings of many companies in the second half of 1985.
“The market is showing just how thin its level of confidence is,” said Alfred E. Goldman, vice president of A. G. Edwards & Sons in St. Louis. “The flip side (of the lower rates) is not positive; it reflects the fact that the economy has slowed down.”
On Wednesday, the Commerce Department said U.S. personal income fell a seasonally adjusted 0.5% in May, following a 1% increase in April.
BellSouth topped the NYSE’s active list, losing 1/2 to 40 5/8.
Data General Rises
In the computer sector, Data General jumped 1 1/8 to 33 1/8, Computervision rose 1 1/8 to 12 3/8 and Digital Equipment climbed 3/8 to 88 7/8. But International Business Machines fell 1/2 to 119 3/8.
Texas Instruments, up 3 at 98 3/4, has been fueled by takeover rumors, analysts said.
Among other blue chips, General Motors slumped 2 to 70 1/2, American Express lost 3/4 to 46 1/2 and Exxon dropped 3/4 to 51 7/8.
International Harvester lost 1/8 to 7 7/8. The company said its financial-services unit plans to sell $1.2 billion of agriculture-related receivables.
Southern Co. dipped 1/8 to 21 5/8 after an 800,000-share block crossed at 21 3/4.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 132.43 million shares.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,036, compared to 2,149 on Tuesday.
The Wilshire index of 5,000 equities closed at 1,927.971, down 4.653.
Standard & Poor’s index of 400 industrials fell 0.83 to 205.62, and S&P;'s 500-stock composite index was off 0.71 at 186.63.
At the American Stock Exchange, the market-value index fell 0.59 to 224.79.
But the NASDAQ composite index for the over-the-counter market rose 0.23 to 288.15.
Bond prices tumbled on speculation that a new government report on second-quarter economic growth will be stronger than expected.
The government is due to report today on its estimate of growth in the gross national product this quarter.
Some economists are looking for a gain of between 2% and 3%. That would exceed the meager 0.7% rise in the first quarter but would still trail the 4.3% expansion in the fourth quarter of 1984.
Another quarter of sluggish growth could lead the Federal Reserve Board to accommodate additional declines in interest rates, analysts said. But a pickup in activity could remove an incentive for relaxing credit policy further.
In the secondary market for Treasury bonds, prices of short-term governments fell point, intermediate maturities fell between 3/8 point and 3/4 point and long-term issues were down as much as 1 points, according to the investment firm of Salomon Bros. The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
In corporate trading, industrials and utilities each fell a full point.
Among tax-exempt municipal bonds, general obligations and revenue bonds fell point.
The government sold $9.25 billion in two-year notes at an average yield of 8.51% on Wednesday, down from 9.13% at the May 22 auction and the lowest since 8.38% on Aug. 23, 1978.
Yields on three-month Treasury bills rose 9 basis points to 6.76%. Six-month bills rose 12 basis points to 6.93%, and one-year bills were up 13 basis points at 7.12%. A basis point is one-hundredth of a percentage point. Yields on 30-year Treasury bonds climbed to 10.37% from 10.25% on Tuesday.
The federal funds rate, the interest on overnight loans between banks, rose to 7.25% from 6.5% on Tuesday.