Dow Off 9.07 as IBM Leads Market Retreat
Stocks took their cue from one of the market’s bellwether issues, IBM, and skidded to another broad loss Wednesday.
Other technology stocks also tumbled, as did paper, oil, telephone, drug and insurance stocks.
The Dow Jones average of 30 industrials dropped 9.07 to 1,312.05, and the loss would have been worse except that one of its components, General Foods, extended its takeover-related rally.
Declines overall swamped advances by five to two on the New York Stock Exchange, where 42 issues slumped to 52-week lows.
Big Board volume slowed to 92.12 million shares from 97.87 million Tuesday, with some participants absent to observe the Jewish holy day Yom Kippur.
Slide Began Tuesday
Prices opened mixed but quickly drifted lower, with losers building a dominant lead over gainers by mid-session. Prices were near their lows of the day at the close.
The slide began Tuesday when investors took a second look at the agreement between the United States and four other nations to push the dollar lower on world currency markets.
The weekend agreement initially sent the dollar tumbling and stocks soaring Monday, with the accord raising hopes for a stronger U.S. economy and stable interest rates.
The dollar lost additional ground in currency trading Wednesday. But Wall Street has turned skeptical over whether the five-nation effort will produce a sustained decline in the dollar and, if so, how long it will take.
Many analysts have concluded that the benefits of a lower dollar would not be felt immediately by most U.S. companies. For now, they said, investors continue to worry about the economy’s strength, the massive federal budget deficit and the prospect of corporate earnings remaining under pressure.
Indeed, investors have had little tolerance this week for companies forecasting weak profits.
Computer Issues Slide
For example, Wherehouse Entertainment plunged 6 to close at 17, or 26%, on the American Stock Exchange after saying that its fiscal first-quarter earnings would trail year-earlier results.
On the Big Board, International Business Machines set the tone for the market by skidding 2 3/4 to 124 in heavy trading after losing 1 3/8 on Tuesday.
Elsewhere in the computer sector, Digital Equipment dropped 1 7/8 to 107 5/8, Data General fell 1 1/8 to 38 1/8, Prime Computer was off 1 at 17 and, on the Amex, Wang Laboratories’ class B shares fell 1 to 16 3/4.
On the upside, General Foods climbed 5 to 106 3/4 and topped the NYSE’s active list after soaring 16 5/8 on Tuesday, when it disclosed receiving a takeover bid from an unidentified suitor.
Empire Airlines rose 1 to 10 1/2 in over-the-counter trading after it also received a bid from a suitor that it declined to name, an offer that the carrier said was “in excess of current market price.”
Philadelphia Electric fell to 14 1/2 after a 935,900-share block crossed at that price.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 111.55 million shares.
Large blocks of 10,000 or more shares traded on the NYSE totaled 1,821, compared to 1,752 on Tuesday.
In the bond market, prices moved mostly higher amid speculation that the Federal Reserve Board may relax its monetary policy.
Some economists said a relaxation of policy may be in order as part of the U.S. agreement with four other nations to reduce the value of the dollar. But other analysts said the Fed cannot afford to relax its monetary policy while the money supply is growing so rapidly. Rapid money growth, they argue, may be laying the groundwork for a resurgence of inflation.
Inflation Tamed
Inflation at the moment appears to be under control. The government reported Tuesday that consumer prices edged up only 0.2% in August and have risen at an annual rate of 3.3% for the year.
In secondary trading, yields on three-month Treasury bills were unchanged at 6.86%. Six-month bills were off 18 basis points at 6.86%, while one-year bills were off 9 basis points at 7.27%. A basis point is one-hundredth of a percentage point.
In the secondary market for Treasury bonds, prices of short-term governments rose point, intermediate maturities rose by 11/32 point and long-term issues were unchanged, according to the investment firm of Salomon Bros.
The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 0.32 to 106.30 from Tuesday’s late level. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, rose 3.58 to 1,115.81.
Yields on 30-year Treasury bonds were 10.59%, unchanged from late Tuesday.
In corporate trading, industrials and utilities were up 3/4 point in light trading. Among tax-exempt municipal bonds, general obligations rose 1/2 point and revenue bonds were up 5/8 point.
