Dow Tumbles 21.73 in Biggest Sell-Off Since February of Last Year

Heavy selling by professionals and interest-rate concerns sent stock prices plummeting Tuesday as the Dow Jones average of 30 industrials plunged 21.73 to 1,325.16. The market’s blue-chip issues dropped to their worst combined loss in nearly 1 1/2 years.

The Dow suffered its biggest one-day decline since losing 22.82 points on Feb. 28, 1984. The loss also dropped the average to its lowest level since July 9, when it closed at 1,321.91.

The Dow Jones average of 20 transportation issues skidded 13.23, or nearly 2%, to 681.41.

Losers overall swamped gainers by four to one on the New York Stock Exchange, whose composite index dropped 1.46 to 108.81.

Big Board volume swelled to 103.98 million shares from 79.61 million Monday.

At the American Stock Exchange, the market-value index tumbled 2.40 to 231.72.

Turned Sharply Down

Prices drifted lower early in what appeared to be a lackluster session. But the market suddenly turned sharply lower in the afternoon when “sell programs” by several major brokerage firms hit the trading floor at once, analysts said.

Much of the selling was in response to reports from the credit markets that investor demand for the Treasury’s sale of $8.5 billion of new three-year notes was not as strong as previously hoped, said Hildegarde Zagorski, second vice president at Prudential-Bache Securities.

Going into the session, there was concern that interest rates might have to move up to attract buyers for the securities--particularly foreign buyers, since the recent decline in the dollar has made dollar-denominated investments less attractive.

Analysts said the institutional selling programs also appeared to be related to arbitrage activity by the brokerage houses, where the firms sold stocks and bought stock-index futures contracts in order to take advantage of their price differences.

Standard & Poor’s 500-stock composite index was of particular focus, they said.

BankAmerica Most Active

Jacques S. Theriot, senior vice president at Smith Barney, Harris Upham & Co., said that “these sell programs always aggravate the market’s movements” but that their effect seemed particularly acute Tuesday because the interest-rate concerns had already made the market vulnerable.

BankAmerica topped the NYSE’s active list and dropped 1 to 15 5/8 one day after cutting its dividend nearly in half because of major losses.

The announcement appeared to impact other financial issues. Chase Manhattan fell 7/8 to 56, Citicorp lost 3/4 to 47 and Phibro-Salomon dropped 1 7/8 to 42 1/8.

Trans World Airlines fell 1/2 to 22 1/8 after financier Carl C. Icahn, who wants to buy the airline, said he lifted his TWA stake to 40.6%. A 1.17-million-share block of TWA crossed at 22 5/8. Texas Air, which already has agreed to buy TWA, climbed 1/2 to 18 on the American Stock Exchange.

Among the blue chips, International Business Machines fell 1 7/8 to 129 3/8, General Foods lost 2 1/8 to 74 7/8, American Brands was off 1 5/8 to 61 1/2 and General Motors skidded 1 3/4 to 69 3/4.

Ethyl Corp. gained 5/8 to 23 1/8 after a 2-million-share block traded at 22 1/2.

Gulf Canada was unchanged on the Amex at 14, the price at which a 1.1-million-share block crossed.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 126.86 million shares.

Standard & Poor’s index of 400 industrials fell 3.00 to 209.40, and S&P;’s 500-stock composite index was off 2.69 to 187.93.

Indexes Decline

The NASDAQ composite index for the over-the-counter market closed at 300.21, down 1.93.

The Wilshire index of 5,000 equities closed at 1,945.515, down 24.940.

Large blocks of 10,000 or more shares traded on the NYSE totaled 1,893, compared to 1,386 on Monday.

Bond prices were little changed as the government began its record $21.75-billion auctions of new notes and bonds.

The government sold $8.5 billion in three-year Treasury notes at the lowest yields since May, 1983.

The notes went at an average yield of 9.53%, down from 10% at the last auction on May 15 and the lowest since 9.48% on May 16, 1983.

The government plans to auction $6.75 billion in 10-year notestoday and $6.5 billion in 30-year bonds Thursday.

In the secondary market for Treasury bonds, prices of short-term governments slipped 1/32 point, intermediate maturities rose 2/32 point and long-term issues were up 3/32 point, according to the investment firm of Salomon Bros. The movement of a full point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 0.06 to 104.94 from Monday’s late level. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, fell 0.22 to 1,102.62.

In corporate trading, industrials and utilities were up point in light trading, Salomon Bros. said.

Among tax-exempt municipal bonds, general obligations and revenue bonds each fell 1/8 point in light activity, the firm said.

Yields on three-month Treasury bills, meanwhile, fell 3 basis points to 7.25%. Six-month bills were unchanged at 7.46%, and one-year bills were down 4 basis points at 7.60%. A basis point is one-hundredth of a percentage point.

Yields on 30-year Treasury bonds were 10.72%, unchanged from Monday.

The federal funds rate, the interest on overnight loans between banks, traded at 7.625%, compared to 7.8125% on Monday.