Late Sell-Off Drives Dow Down 10 : 14-Point Index Gain Erased in Final Hour; Stocks Mixed

A late wave of selling dragged down the blue chips, leaving the stock market with a mixed showing in heavy trading Tuesday.

The Dow Jones average of 30 industrials, up nearly 14 points going into the final hour of trading, closed at 1,686.42, down 10.25 from Monday.

The sudden setback came after the bond market lost some of its strength. Selling programs linked to arbitrage against stock index futures accelerated the downturn in the stock market, analysts said.

In the broader market, gainers outpaced decliners by nearly 10 to 7 on the New York Stock Exchange, where about 174.51 million shares changed hands.

Edward P. Nicoski, an analyst with Piper, Jaffray & Hopwood, said stocks made broad gains during much of the session as enthusiasm in the bond market spilled over into equities.

“Basically, the stock market keyed off interest rates. The leading economic indicators were not what people expected,” he said.

Analysts Surprised

In the early going, bond prices surged and interest rates on an array of maturities tumbled in response to the government’s latest evaluation of economic prospects.

The Commerce Department reported its main gauge of future economic activity fell 0.6% in January. It was the first decline in the index of leading indicators in nine months and surprised many analysts who had predicted a modest advance.

Sluggish economic growth often coincides with limited borrowing demands, which tends to hold down pressures on interest rates.

The stock and bond markets have also benefited from the almost uninterrupted slide in oil prices, which has improved inflation prospects.

Several issues that have been mentioned as possible takeover candidates were among the most heavily traded stocks. Western Airlines led the NYSE, active list and closed up 1 1/8 at 11 5/8 as more than 4.4 million shares changed hands. Eastman Kodak fell 5/8 to 54 1/2.

Among other volume leaders on the Big Board, General Motors gained 1 3/4 to 79. The auto maker said Monday that it will buy back about $1.95 billion of its stock, mainly for an employee stock purchase program.

Elsewhere in the blue-chip sector, International Business Machines fell 1 1/2 to 149 3/4 and American Telephone & Telegraph to 22 1/2.

Some issues managed to wind up with solid improvements.

General Mills rose 3 5/8 to 72 7/8. The company was not aware of any reason for the movement, a spokesman said.

Disney jumped 4 3/8 to 143 1/2. A Disney spokesman said he knew of no reason for the move but noted that shares will be distributed today from a previously announced 4-for-1 stock split. He also said the Disney film “Down and Out in Beverly Hills” has been doing very well at the box office.

Large blocks of 10,000 or more shares traded on the NYSE totaled 3,458, compared to 2,544 on Monday.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 206.33 million shares.

The NYSE composite index of all its listed common stocks fell 0.34 to 129.75.

Standard & Poor’s index of 400 industrials fell 1.35 to 246.98, and S&P;’s 500-stock composite index was off 1.04 at 224.38.

30-Year Bond Up

In the credit market, the Treasury’s benchmark 30-year bond, which climbed about 1 points by midday, closed up 3/4 point, or about $7.50 for each $1,000 in face amount. Its yield was 8.05%, down from 8.11% late Monday.

In the secondary market for Treasury securities, prices of short-term governments rose from 7/32 point to 1/2 point, intermediate maturities rose from 9/32 point to 13/32 point and long-term issues gained from 3/32 point to 3/4 point.

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 0.57 from Monday’s close to 116.46. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, was up 3.99 to 1,218.93.

In corporate trading, industrials gained 1 point and utilities rose point.

Among tax-exempt municipal bonds, general obligations rose 3/8 point and revenue bonds edged up point in moderate dealings.

The federal funds rate--the interest on overnight loans between banks--traded at 7.5625%, compared to 7.75% late Monday.