Market Reverses Early Losses; Dow Gains 0.24
Stock prices finished mixed Wednesday, rebounding from a broad early loss in a volatile day for the securities and oil markets.
The stock market managed to hold its ground despite prices plunging in the bond market as long-term interest rates bounced back up, erasing recent steep declines. Analysts said weakness began to show up late Tuesday in the bond market, which has staged a dramatic advance of late.
The Dow Jones average of 30 industrials, down about 12 points at midday, finished with a 0.24 gain at 1,686.66.
Volume on the New York Stock Exchange tailed off to 154.56 million shares from 174.51 million on Tuesday.
Meanwhile, the price of the benchmark U.S. crude oil, West Texas Intermediate, fell as low as $11.49 a barrel on contracts for April delivery at the New York Mercantile Exchange. It subsequently jumped to $13, then dropped back to $12.09, for an overall gain of 11 cents from the previous closing price.
Computer Issues Decline
In economic news, the government reported a 0.4% rise in factory orders and a 4.4% increase in new home sales during January.
Most computer and other major technology issues were lower from the opening bell. International Business Machines dropped 1 3/8 to 148 3/8, Motorola 3/4 to 41 1/2, Hewlett-Packard 1 to 41, Burroughs 1 5/8 to 65 3/8, Honeywell 1 1/8 to 73 7/8 and Data General 7/8 to 38 1/8.
Western Airlines led the active list, up 5/8 at 12 on volume of more than 4.2 million shares. The stock has been strong lately on widespread takeover speculation.
Energy issues were mostly higher on tentative talk that oil prices might be bottoming out after a long decline this winter. Exxon rose 5/8 to 52 1/2, Chevron 1/2 to 36 3/8, Atlantic Richfield 1/2 to 52 3/8, Amoco to 56 and Mobil to 28. But Occidental Petroleum dropped 1/2 to 25.
In the daily tally on the Big Board, about four issues declined in price for every three that gained ground.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,854, compared to 3,458 on Tuesday.
Bond Prices Slide
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 185.43 million shares.
Standard & Poor’s index of 400 industrials rose 0.12 to 247.10, while S&P;’s 500-stock composite index was down 0.04 at 224.34.
The bond market sell-off came in nervous trading amid disappointment about the prospects for interest rate reductions abroad.
Analysts said the selling also reflected speculation that the market’s rally has run its course. Several money managers have recently advised clients to be ready to lighten their bond holdings once the market started pulling back.
By the time trading was done for the day in New York, the bellwether 30-year Treasury bond had lost about $22.50 for each $1,000 in face amount. The yield on the bond moved up to 8.23%.
Scott F. Grannis, senior economist at Claremont Economics Institute in Claremont, said the setback may turn out to be a temporary phenomenon, reflecting a decision by investors to lock in profits from the market’s powerful run this year. “People are understandably anxious to take their profits,” he said.
Hopes that West Germany and Japan would cut their official discount rates created euphoria recently in the bond market, sparking a rally that pushed the 30-year government bond yield down to 1978 levels of about 8%.
In the secondary market for Treasury securities, prices of short-term governments fell from 1/32 point to 5/16 point, intermediate maturities fell from 1/2 point to 13/16 points and long-term issues plunged from 27/32 points to 29/32 points, according to the investment firm of Salomon Bros.
In corporate trading, industrials and utilities lost 1 1/2 points. Trading volume was moderate.
Among tax-exempt municipal bonds, revenue bonds dropped back one point in active dealings and general obligations were off 1/2 point in quiet trading.
Yields on three-month Treasury bills finished down six basis points at 6.76%. Six-month bills and one-year bills both edged up one basis point to 6.77%.
The federal funds rate--the interest on overnight loans between banks--traded at 7.75%, compared to 7.5625% late Tuesday.
