Stocks Slide in Surge of Year-End Selling; Dow Index Falls 14.22

Stock prices tumbled in moderate trading Monday, pushed down by a year-end surge of profit taking and news that suggests the economy will remain sluggish through early 1986.

The Dow Jones average of 30 industrials fell 14.22 points to 1,528.78. It was the Dow’s first double-digit drop since Dec. 2, when the blue-chip indicator also declined by 14.22 points, and was only the second double-digit drop since Sept. 11, when it fell 14.01 points.

The Dow has climbed more than 200 points in the past three months and hit an unprecedented high Dec. 16 of 1,553.10, the 36th record that it has set this year, reflecting Wall Street’s strongest rally in history.

Analysts were not surprised by the downturn and emphasized that the volume of shares traded on the New York Stock Exchange also was at a three-week low of 107.89 million, compared to 170.27 million on Friday. The last time Big Board volume finished so lightly also was Dec. 2, when it was 103.53 million.

‘Pausing for a Breather’

“In the final analysis, it’s a market that has run a two-minute mile and is pausing for a breather,” said Larry Wachtel, an analyst for Prudential-Bache Securities, a New York investment firm. “When you have that kind of phenomenon, you often have sinking spells like this.”

Losing issues outran gainers by nearly three to one on the Big Board. Stocks of auto makers, steelmakers, retailers, airlines, financial firms and other manufacturing and service industries fell broadly.

The NYSE’s composite index, which measures all listed issues, finished at 120.01, off 1.30. Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 130.92 million shares.

Analysts noted that Monday was the last day that stock profits could be applied to 1985 income figures and said many corporate money managers skimmed their rally gains to make year-end statements look more impressive.

Other investors sold stock because they anticipated the price would drop from more profit taking Tuesday, the first day that income from such sales can be applied to 1986 income. There is a five-day delay in recording profits from such sales.

A Commerce Department report that showed that personal income was failing to keep pace with consumer spending suggested to analysts that the consumer sector cannot sustain its heavy buying and the economy will continue to grow slowly.

Report on Deficit

A Treasury Department report showing that the government had a $33.39-billion deficit last month, 23% higher than in October, also was viewed as a bad sign for the economy.

“All of that suggests in the coming quarter there will have to be some retrenchment in purchases,” said Michael Metz of the New York investment firm Oppenheimer & Co.

Among the biggest decliners on Wall Street, Pfizer fell 2 7/8 to 50 1/8 on volume of 2.48 million shares, a reaction to London press reports that linked some deaths in Britain to the company’s anti-arthritic drug Feldene. Pfizer denounced the reports as sensationalist.

Union Carbide fell 1 1/8 to 71 on volume of 1.21 million shares after press reports suggested that the chemical company faces fresh legal problems over the accident last year in Bhopal, India, which claimed at least 1,700 lives.

Other losers included General Motors, down 2 at 72; Ford, down 2 at 55 1/8; Sears, down 1 3/8 at 37 7/8; Burroughs, down 1 7/8 at 62; General Electric, down 1 1/2 at 69 3/4; Exxon, down 1 1/8 at 53 3/8; UAL, down 1 at 49; Merck, down 2 1/8 at 132 5/8, and Citicorp, down 1 at 48 1/8.

Notable on the gaining side were tobacco stocks, including Phillip Morris, up 4 at 90 3/4, and R. J. Reynolds, up 1 3/4 at 33, after a jury in Santa Barbara ruled that Reynolds was not liable for the death of a man who smoked for five decades.

The Wilshire index of 5,000 equities closed at 2,159.209, down 21.805 from last Friday.

Standard & Poor’s index of 400 industrials closed at 231.60, down 2.57, and S&P;’s 500-stock composite index was 208.57, down 2.37.

At the American Stock Exchange, the market value index was 242.98, down 1.13. The NASDAQ composite index for the over-the-counter market closed at 321.58, down 1.54.

Big blocks of 10,000 or more shares traded on the NYSE totaled 3,080, compared to 2,577 on Friday.

In the bond markets, prices were mostly lower in quiet, pre-Christmas trading.

Analysts said the credit markets apparently ignored the Commerce Department’s report that personal income rose last month.

In the credit markets, the “moderately bearish” economic numbers had little effect, said Lance Brofman, chief economist for Donald Sheldon Inc. in New York.

“It was a typical pre-holiday market,” Brofman said. “Dealers were unwilling to take positions.”

Frank Mastrapasqua, of Smith Barney, Harris Upham & Co., said the acceleration in income growth could suggest to the Federal Reserve Board that the economy did not need stimulation in the form of lower interest rates, and the Fed might not move to further ease credit conditions in the near future.

In the secondary market for Treasury bonds, prices of short-term governments were unchanged to 1/32 point higher, intermediate maturities fell 3/32 point and long-term issues were down from 7/32 to 3/8 point, according to the investment firm of Salomon Bros.

The movement of a 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 0.02 to 111.08. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, fell 0.82 to 1,163.38.

In corporate trading, industrials and utilities were unchanged in light trading. Among tax-exempt municipal bonds, general obligations and revenue bonds also were unchanged in light trading.

Yields on three-month Treasury bills were down four basis points to 7.08%. A basis point is one-hundredth of a percentage point. Six-month bills rose two basis points to 7.13%, and one-year bills were up three basis points at 7.13%.

Yields on 30-year Treasury bonds rose to 9.35% from 9.32% late Friday.

The federal funds rate, the interest on overnight loans between banks, traded at 7.875%, down from 8% late Friday.