Sell-Off Hits Market; Dow Off 17.86
The stock market suffered a setback Tuesday as investors shed blue chips and technology issues.
Electric utility stocks retreated amid continuing reports of a nuclear power plant disaster in the Soviet Union. The Dow Jones average of 15 utilities closed with a loss of 2.93 at 182.65.
The Dow Jones average of 30 industrials fell 17.86 to 1,825.89.
In the broader market, declining issues outnumbered advances by more than two to one on the New York Stock Exchange as Big Board volume rose to 148.77 million shares from 123.86 million on Monday. The NYSE composite index finished at 138.41, down 1.41.
John L. Stanley, an analyst for Brown Bros. Harriman & Co., said utilities that have a commitment to nuclear power, with incomplete or unlicensed plants, could be hurt the most by negative public reaction.
Opponents of nuclear power may get psychologically and politically recharged, which might end up prolonging the regulatory approval process in the United States and cost some utilities money, Stanley said.
The Soviet government has acknowledged a disaster occurred at its Chernobyl nuclear power plant, 60 miles north of the city of Kiev, and appealed to experts in West Germany and Sweden for help in containing it.
Utilities Down
Some of the heavily traded utilities included Long Island Lighting, which fell 1/2 to 12 1/8. Lilco has been fighting opposition to starting up its Shoreham nuclear power plant on New York’s Long Island because of concerns over an evacuation plan.
Commonwealth Edison dropped 1 7/8 to 30 7/8, Middle South Utilities slid 1/2 to 13 and AZP Group closed down 1/2 at 29.
Investors acted “irrationally” by dumping the utility stocks, said Michael Metz, a vice president with Oppenheimer & Co., noting that U.S. nuclear plants have vastly superior safety features than those in the Soviet Union.
Weakness in utility stocks “cast a pall” over the entire market, he added.
Professional selling programs tied to stock index futures accentuated the market’s losses. Such trading strategies are designed to profit from price differences between stock index futures and the underlying stocks.
Market watchers were discouraged that stock prices failed to improve in response to renewed strength in the bond market.
Before trading got under way on Wall Street, the government released its chief gauge of future economic activity. The 0.5% rise in the index of leading indicators last month followed a 0.9% February increase.
But the market failed to reflect any optimism over the economy’s prospects.
Conspicuous losers included computer stocks, which had recently displayed strength and buoyed the overall market. Market leader International Business Machines tumbled 2 to 159 3/8. Sperry, off 3/8 to 55 5/8, said its fourth-quarter net income rose by 8.9%, but profit fell sharply in its latest fiscal year.
The volume leader was American Telephone & Telegraph, up at 25 5/8.
American Brands was also in the plus column, rising 5 1/2 to 97, a 52-week high. Rumors have circulated recently that the company would become a takeover target of B.A.T. Industries PLC, a major British tobacco and insurance company. A spokesman for B.A.T., which fell 1/16 to 6 on the American Stock Exchange, said the company never comments on rumors.
Upjohn closed up 8 1/2 at 168 1/2. The company reported that one of its drugs used to treat high blood pressure also helps to reverse baldness.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,605, compared to 2,009 on Monday.
In the NYSE tally, issues posting price declines totaled 1,142, gainers totaled 484 and 398 issues were unchanged.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 177.85 million shares.
Standard & Poor’s index of 400 industrials fell 2.75 to 268.32, and S&P;’s 500-stock composite index was down 2.57 at 240.51.
The Wilshire index of 5,000 equities closed at 2,480.364, down 23.329 from Monday.
The NASDAQ composite index for the over-the-counter market fell 2.25 to 389.18. At the American Stock Exchange, the market-value index closed at 272.25, down 2.27.
Bond Prices Rally
The bond market staged another advance, with long-term interest rates falling sharply in thin trading as investors awaited details of the Treasury’s quarterly refunding operation.
Analysts said trader concerns over whether Japanese investors would continue their active buying of U.S. securities continued to dissipate, and the market generally believed that the U.S. economy was not as robust as some economic figures indicated.
“It was just a general feeling that things were not as bad as the market pushed them last week,” said Paul Boltz, financial economist for T. Rowe Price Associates of Baltimore.
The bellwether 30-year Treasury bond rose more than $10 for each $1,000 in face amount to yield 7.44%, down from 7.50% in trading late Monday.
The Treasury is to announce today details of its quarterly refunding operation. Analysts estimate that the operation will mean a record $24 billion to $25 billion in new notes and bonds will be auctioned next week.
“Until that’s out of the way, there is a potential ‘if,’ a potential question mark that has to be erased before we get moving again one way or another,” said J. Anthony Naylor, vice president of fixed-income securities for Rodman & Renshaw Inc.
Interest rates--which move in the opposite direction of bond prices--rose only briefly on the Commerce Department’s report that new home sales rose by 27.4% in March to the highest annual rate since the government began keeping records in 1963.
In the secondary market for Treasury bonds, intermediate maturities rose in the range of 3/8 to 5/8 point and long-term issues were up as much as 1 5/32 point. Short-term governments edged up by 3/32 to 3/16 point, according to the investment firm of Salomon Bros.
