Stocks Tumble a Record 41.91 : Sell-Off Tied to Soviet Disaster, Market Future
The Dow Jones industrial average tumbled a record 41.91 points Wednesday in a stock market sell-off fed by worries about the Soviet nuclear disaster and the market’s prospects in general.
The plunge broke a record drop of 39.10 points that was set last Jan. 8 and left the closely watched indicator at 1,783.98--the first time since April 11 that the average has been below the 1,800 level.
On a percentage basis, however, Wednesday’s single-session decline of 2.3% in the Dow’s value was less than the 2.5% loss of Jan. 8 because the average is higher now. And the 2.5% loss pales in comparison with that of Oct. 28, 1929, “Black Monday,” when the average fell 38.33 points to 260.64, a 12.8% decline.
Wednesday’s volume was 147.46 million shares, compared with 148.77 million the day before. The number of declining stocks outnumbered those advancing by four-to-one.
Among the principal losers in the day’s trading were utility stocks, which were hurt by fears that the Soviet crisis would increase anti-nuclear sentiment in the United States. Stocks of some food companies were also hit, as investors grew concerned that the disaster would reduce Soviet grain production and raise world grain prices.
Accelerating the drop was computer-executed “program trading,” analysts said. Such transactions, which can involve several hundred different stock issues and millions of dollars, are triggered by price disparities between the stock market and the market in stock-index futures.
Some market watchers said the accident at the nuclear power plant in the Soviet Ukraine catalyzed investors’ general concerns about a stock market that has been listless in recent weeks.
‘Just an Excuse’
“The Soviet situation was just an excuse for the market to go down,” said Michael Metz, an analyst with Oppenheimer & Co. in New York. “Investors have been fretting over a lot of equivocal economic news that’s been interpreted favorably until recently.”
For example, he said, the market has been cheered by economic figures showing lower factory production, reasoning that such news would prompt the Federal Reserve Board to lower interest rates further. But now many believe interest rates will decline no further, and investors’ worries have been compounded by disappointing corporate earnings results.
“They’ve got to wonder what’s ahead,” Metz said.
Developments in the Soviet Union sent some investors on a hunt for stocks that might profit from the disaster. For example, analysts at Prudential-Bache Securities were swamped with requests from investors who wanted to know which pharmaceutical companies manufacture iodine tablets, said Larry Wachtel, a market analyst.
They apparently reasoned, he said, that the public would buy up the tablets, which are recommended by some authorities as a help in reducing the health risks from airborne radiation. While Eli Lilly makes such tablets, what they earn off them is relatively little, Wachtel said. “This kind of buying is just pure speculation.”
Rally Not Broad-Based
The Dow industrial average set a new record high of 1,855.90 on April 22, but analysts say fewer and fewer stocks have participated in recent rallies.
Market indexes that reflect the movements of more stocks than the 30 that make up the Dow industrial average have been listless recently, “and you could see trouble brewing last week,” said Ralph Bloch, market analyst with the Moseley, Hallgarten, Estabrook & Weedon brokerage in Chicago. The number of advancing stocks was so small “that a soft summer breeze could have knocked the market off its perch.”
At the same time, noted Eugene Peroni, a technical analyst with Bateman Eichler, Hill Richards in Los Angeles, the market’s volume was only about 148 million shares, about the average in recent sessions. That kind of trading activity “shows this was far less than a real bout of panic selling,” he said.
“The Soviet situation is really causing uncertainty, and so you’re going to see a lot of erratic movement until that uncertainty is resolved,” he predicted.
Other factors were believed to have contributed to Wednesday’s stock market decline. For one thing, the Commerce Department said early in the day that the U.S. trade deficit had grown to $14.5 billion for the month of March as imports of manufactured goods rose to an all-time high.
Factory Orders Off 2.3%
Separately, the government reported Wednesday that orders to U.S. factories for manufactured products fell 2.3% last month, the second straight monthly drop and the largest in nearly two years. (Details in Business.)
Reacting to the Soviet accident, the Dow Jones average of 15 utilities fell 3.02, to 179.63. Among the declining utilities were Pacific Gas & Electric, whose stock was down 67.5 cents, to $21.25; Long Island Lighting, down 75 cents, to $11.375; Niagara Mohawk Power, which declined 75 cents, to $21.875; and General Public Utilities, which fell 67.5 cents, to $21.25.
However, analysts said the utilities’ stocks have been falling for some days already because of growing investor sentiment that interest rates have bottomed out.
The NYSE composite index fell 2.66, to 135.75. Standard & Poor’s index of 400 industrials dropped 5.68, to 262.64, and S&P;’s 500-stock composite index fell 4.99, to 235.52.
The NASDAQ composite index for the over-the-counter market fell 5.94, to 383.24. At the American Stock Exchange, the market value index declined 3.28, to 268.97.
