Drop in Airline Stocks Sends Dow Below 1,300
A steep decline in airline stocks led the market sharply lower Tuesday, pushing the Dow Jones industrial average below 1,300 for the first time in three months.
Computer, auto, retail and health-care issues also were notable losers.
The Dow Jones average of 30 industrials skidded 10.98 to 1,298.16, closing at its lowest level since it stood at 1,297.38 on June 19. The Dow Jones transportation average tumbled 13.70 to 645.83.
Declines overall led advances by nearly three to one on the New York Stock Exchange, with 79 issues setting 52-week lows.
Big Board volume swelled to 111.93 million shares from 66.70 million Monday, when many traders were absent to observe Rosh Hashanah, the Jewish New Year.
Prices opened mixed but retreated in the afternoon when the airlines and other transportation stocks began sliding.
The sell-off in the airline sector came after Goldman, Sachs & Co. analyst Michael Armellino cut his estimate of the upcoming earnings of AMR Corp., Southwest Airlines and Piedmont Aviation.
Some other brokerage houses also have recently downgraded their earnings estimates or investment recommendations on airline stocks, which were among the market’s best-performing groups earlier this year. Some of the downward revisions have included warnings that the airlines’ strong traffic growth is slowing.
AMR, the parent of American Airlines, dropped 2 to 39 3/4; UAL, which operates United Airlines, slumped 3 3/8 to 49 1/8; Eastern Airlines lost 5/8 to 9 1/8, and Piedmont fell 1/2 to 29 7/8. Southwest was unchanged at 24, however. Texas Air fell 1 1/8 to 15 5/8 on the Amex.
Brokers said the abrupt decline in the transportation sector quickly revived the bearish sentiment that was building in the broader market last week, when the Dow Jones industrials lost 28 points.
They said stocks remained under pressure because of investors’ uncertainty about whether the economy is improving from its weak showing in the first half of this year and, if so, whether that means that interest rates are headed higher.
In the computer sector, International Business Machines fell 1 5/8 to 126 3/4, Control Data tumbled 2 7/8 to 17 5/8 and Digital Equipment lost 2 to 104 1/2.
Point-plus losers among the health-care stocks included Upjohn, SmithKline Beckman, Humana and Hospital Corp. of America.
Commonwealth Edison slipped 1/8 to 29 after a 1.36-million-share block crossed at 29 3/8.
Detroit Edison topped the NYSE’s active list and was unchanged at 15 5/8; a 944,000-share block traded at 15 3/8.
Bonds were down from Monday’s closing prices, rebounding from their lows of the session in the late afternoon after the Treasury Department announced that it was postponing the three-part mini-refunding that normally would have been held next week. The Treasury cited a lack of action by Congress to raise the federal debt limit.