Dow Drops 3.92 While Market Takes Breather
The stock market took a breather from its recent advance with a mixed showing in active trading Tuesday.
Prices opened higher and it appeared that the market was ready to score its sixth consecutive gain. But the upswing faded after two hours, just when the Dow Jones average of 30 industrials climbed above its record high of 1,359.54 set July 19.
The average then fell nearly 7 points but trimmed the loss by the closing bell to 3.92 points, finishing at 1,350.81.
Declines slightly trailed advances on the New York Stock Exchange, but the NYSE composite index lost 0.14 to 107.50. Auto, telephone and computer issues led the losers, while several financial stocks moved ahead.
Big Board volume swelled to 110.35 million shares from 78.54 million Monday, which was a semi-holiday because of Columbus Day.
Typical ‘Correction’
Some analysts interpreted the market’s mixed performance as a typical “correction,” with many investors taking profits following the recent run-up, as opposed to a significant reversal in investor sentiment.
Much of Wall Street’s attention Tuesday was given to third-quarter corporate earnings, however, particularly in the banking sector.
J. P. Morgan rose to 50 1/2 and Wells Fargo climbed 1 to 54 1/8 after both posted higher profits. Industry leader Citicorp also reported improved earnings, but they fell short of Wall Street expectations and the stock lost 1 3/8 to 42 5/8.
Other issues dropping amid what were viewed as disappointing earnings were W. R. Grace, off 1 to 38 3/8; Alaska Air, 2 1/8 to 18 3/8, and Hilton Hotels, 1 7/8 to 66 1/8.
Auto Issues Declined
Auto stocks fell after the industry said its early October domestic sales fell 10% from a year earlier, largely because most of the companies’ special financing offers expired Sept. 30. General Motors fell 1 to 69, Ford lost 3/8 to 46 5/8 and Chrysler slipped 1/8 to 37 3/4.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,246, compared to 1,744 on Monday.
Bond Prices Advance
In the bond market, prices finished higher while short-term interest rates were little changed.
Analysts said the advance was partly due to Paul A. Volcker’s announcement that he plans to stay on as head of the Federal Reserve Board.
Inflation has remained subdued during Volcker’s term as chairman of the Fed, and that development has won Volcker many friends in the fixed-income markets.
There had been rumors, however, that he was considering leaving the Fed to head the World Bank.
Meanwhile, bond prices remained under pressure because of uncertainty about when the federal debt ceiling will be raised.
In the secondary market for Treasury bonds, prices of short-term governments rose 2/32 point from Friday’s late level, intermediate maturities rose by between 3/32 point and 3/8 point and long-term issues were up 18/32 point, according to the investment firm of Salomon Bros. (Bond markets were closed Monday for Columbus Day.) 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 rose point in moderate trading.
Among tax-exempt municipal bonds, general obligations fell 1/8 point and revenue bonds were unchanged.
Yields on three-month Treasury bills were up 1 basis point at 7.19% from Friday’s close. Six-month bills were off 1 basis point at 7.35%, while one-year bills were off 1 basis point at 7.47%.
