Interest-Rate Concern Sinks Stocks; DJ Off 6

The stock market fell for the second straight session Tuesday amid uncertainty over the outlook for interest rates and the economy.

Computer issues showed a broad loss in a session of moderate activity on Wall Street.

The Dow Jones average of 30 industrials, down 6.04 on Monday, dropped another 6.50 to 1,321.91.

Volume on the New York Stock Exchange reached 99.06 million shares, up from 83.67 million on Monday.

Stock prices rallied late last week as interest rates tumbled in the credit markets. But since then, rates have generally been moving back up again.

On Tuesday, prices of long-term government bonds, which move in the opposite direction from interest rates, showed losses averaging about $2.50 for every $1,000 in face value.

Computer Issues Fall

The computer sector evidently suffered from new reductions in analysts’ earnings estimates for some companies in the industry. International Business Machines fell 2 to 121, Sperry 1 1/2 to 51 1/2, Data General 1 1/2 to 35, Digital Equipment 1 5/8 to 91 7/8 and Burroughs 1 to 57 1/2.

International Paper dropped 7/8 to 47 7/8. The company reported second-quarter earnings of 57 cents a share, down from $1.21 in the comparable period last year.

Tyco Laboratories fell 2 to 38, also on lower quarterly profits.

Auto issues gave ground for the second straight day amid fears of intensified competition in the U.S. car market. General Motors was down 7/8 at 69 1/2, Ford Motor at 43 1/2, Chrysler 1 at 33 7/8 and American Motors 3/8 to 3 1/2.

AMF tumbled 4 3/8 to 14, posting the day’s biggest percentage decline among NYSE issues. Minstar Inc. of Minneapolis said it would accept for payment about 59% of the AMF shares tendered to it under a merger plan. The agreement calls for holders of remaining AMF stock to receive $18.25 in face amount of debentures per share.

In the bond market, prices were narrowly mixed as Federal Reserve policy-makers opened a private, two-day meeting on future credit strategy.

Some analysts expect that the Fed may take steps to encourage lower interest rates because of continuing signs of weakness in some sectors of the economy.

Lower rates would boost bond prices.

But other analysts say the Fed will hold a steady course because of concerns that double-digit growth in the money supply over the past few months may increase the danger that inflation will reignite.

Meanwhile, the government sold $8.51 billion in new 52-week bills at an average annual yield of 7.09%, down from 7.18% at the last similar auction June 6.

The average return was the lowest for a 52-week bill auction since 7.07% on April 26, 1978.

Yields on 30-year Treasury bonds edged down to 10.28% from 10.29% late Monday.

The federal funds rate, the interest on overnight loans between banks, traded at 7.875%, compared to 7.938% late Monday.