Blue Chips Hit by Late Sell-Off; Dow Drops 14
Stock prices finished mixed Friday after a late sell-off in blue chips ended a string of four consecutive gains for the market.
News of the Federal Reserve’s reduction of its discount rate didn’t come until after the close of trading.
The Dow Jones average of 30 industrials dropped 14.63 to 1,840.40, cutting its gain for the week to 50.22 points. Volume on the New York Stock Exchange came to 153.64 million shares, against 161.40 million Thursday.
Analysts said traders were proceeding cautiously on the final day of trading for some stock options and stock-index futures. Program trading involving these contracts and individual stocks has helped produce some sharp swings in the market on expiration days in the past.
This time around, blue-chip issues took a quick dive in the last few minutes of trading while the rest of the market held steady.
No Progress by OPEC
Observers saw some potential benefit for the market in the news that Organization of Petroleum Exporting Countries ministers had made no apparent progress Friday toward an agreement on a plan to shore up oil prices.
Crude oil futures for May delivery settled at $11.92 a barrel, up 9 cents from Thursday on the New York Mercantile Exchange.
The Fed’s action in cutting the discount rate to 6.5% from 7%, effective Monday, promises to be a prime topic of attention when the markets reopen next week.
With all of its favorable implications, some analysts have argued that the move will be greeted with only a muted response at best because it has been so widely anticipated.
Polaroid, which posted a first-quarter profit against a loss in the comparable period last year, gained 3 to 62.
Harris Graphics climbed 3 3/4 to 22 1/8. The company received an unsolicited $21-a-share takeover bid from AM International.
National Gypsum, subject of a bidding war between Wickes and an investor group led by National Gypsum’s management, jumped 6 3/4 to 68 1/2.
Burroughs dropped 3 3/8 to 62 on the company’s report late Thursday of a sharp decline in first-quarter earnings.
Travel-Related Issues Rise
Xerox fell 5/8 to 60 1/2 on top of a 4 3/4-point slide Thursday, when the company posted a lower quarterly profit.
A variety of issues rose as investors continued to search out beneficiaries of a developing trend toward vacations in this country rather than foreign travel. National Convenience Stores rose 1 3/8 to 13, Southland Corp. 1 3/8 to 52 7/8, Ponderosa 1 to 17 1/8 and Pillsbury, operator of Burger King restaurants, 1/2 to 79 1/2.
Advancing issues outnumbered declines by about 10 to 9 in the overall tally on the Big Board.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,807, compared to 3,071 on Thursday.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 179.40 million shares.
Standard & Poor’s index of 400 industrials lost 0.63 to 268.77, and S&P;'s 500-stock composite index was down 0.65 at 242.38.
Government bond prices finished mixed, but above the lowest levels of the day, after the Fed reduced the discount rate. Municipal bonds gained amid indications that tax reform efforts are bogging down in Congress.
Prices of government securities improved after the Fed’s late-afternoon announcement of the discount rate cut.
The Treasury’s 30-year bond closed off 1/2 point, or about $5 for each $1,000 in face amount, and its yield stood at 7.19%, compared to 7.13% late Thursday. Earlier in the day, the key bond was down nearly a full point.
The discount rate is the only interest rate the central bank controls directly, and movements in it often point the direction that other interest charges take. When the Fed trimmed the key rate on March 7 to 7%, other rates subsequently retreated.
Some analysts predicted that commercial banks on Monday will cut their prime lending rates. But others said the Fed’s latest move brought the discount rate down to the levels of money-market rates.
In any case, the impact of the Fed’s action on the bond trading will be restrained because the reduction was so widely anticipated.
In the secondary market for Treasury bonds, prices of short-term governments dipped by 3/32 point to point and intermediate maturities ranged from up by 1/32 point to down 3/16 point. The Treasury’s 20-year bond dropped 3/4 point, according to the New York investment firm of Salomon Bros.
The Shearson Lehman daily Treasury bond index, which measures prices on all maturities of outstanding Treasury issues, slipped 2.34 to 1263.08.
In corporate trading, most industrials and utilities held steady in quiet dealings.
Among tax-exempt municipal bonds, general obligations and revenue bonds showed gains on the day of point to 1/2 point in moderate trading.
Yields on three-month Treasury bills dipped by one basis point to 5.88%. Six-month bills fell two basis points to 5.85%. One-year bills were down one basis point at 5.85%.
The federal funds rate--the interest on overnight loans between banks--traded at 6.675%, down from 6.75% late Thursday.