Market Decline Slows; Dow Index Drops 6.20
Stock prices dropped Thursday for the third time this week in reaction to more economic bad news and uncertainties about the Soviet nuclear disaster, but the selloff was less severe than in the previous session.
The Dow Jones average of 30 industrial stocks fell 6.20 points to 1,777.78, one day after Wall Street’s best-known index plunged 41.91, the worst single-day point drop in its history. Broader measures of the market also fell.
Counting Tuesday’s 17.86-point decline, the Dow Jones industrial average has fallen 65.97, or 3.5%, this week. Since the indicator’s record high of 1,855.90 reached on April 21, it has fallen 78.12, or 4.2%.
Wall Street analysts said they were not surprised by the decline, since the indicator had risen by 500 points since last fall, and many investors and money managers were looking for an excuse to cash in on that gain.
“Don’t forget, we were below 1,300 as recently as September,” said Richard Schmidt, an analyst at the Hartford, Conn., investment firm Advest Inc.
“I think what strikes me as odd is that it hasn’t behaved like this before,” he said. “I think you’re seeing some backing off now to bring things more into line with reality.”
Much of the stock market’s rally has been attributed to the belief that the economy will strengthen because of lower oil prices, lower interest rates and the declining value of the dollar, which theoretically makes U.S. exports more competitive with foreign goods. But Commerce Department reports Wednesday and Thursday about U.S. economic performance showed that factory orders are still declining, the trade deficit is growing and construction spending is down.
Uncertainty Over Chernobyl
Those reports, coupled with the uncertainties of radiation contamination caused by the Soviet nuclear accident at the Chernobyl power plant, have cast a cloud of depression on the market, analysts said.
“We have had continued selling for fear of what is happening in Russia and the economic consequences,” said Peter J. DaPuzzo, manager of the retail equity group at Shearson Lehman Bros., a New York investment firm. He added: “We think the rally will resume and we’ll see higher prices by midsummer.”
Theodore Halligan, an analyst at the New York office of Piper, Jaffray & Hopwood, a Minneapolis investment firm, said the market now needs a psychological shove to reclaim anxious investors.
“We have not had any serendipitous news for some time,” he said. “We need an unexpected surprise on the deficit or our adverse international balance of payments.”
On the New York Stock Exchange, declining stocks outpaced gainers by a 3-2 margin. Volume on the Big Board totaled 146.48 million shares, compared to 147.46 million Wednesday.
Among the most notable losers, J. C. Penney fell 1 to 69, Hewlett-Packard 1 3/4 to 43 1/2, Eastman Kodak 1 to 57 and General Electric 1 1/8 to 77.
Notable gaining stocks included Ford Motor, up 1 7/8 to 77 1/2; Lockheed, up 2 5/8 to 55 7/8, and Amoco, up 1 1/8 to 59 3/8.
Upjohn jumped 5 to 174 following promising reports about the company’s new drug to cure male baldness.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,906, compared to 2,677 on Wednesday.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 170.92 million shares.
Standard & Poor’s index of 400 industrials fell 0.38 to 262.26, and S&P;’s 500-stock composite index was off 0.36 to 235.16.
Awaiting Auctions
In the bond market, prices moved broadly lower but trading was light as the credit markets awaited further indicators of the health of the economy in advance of a massive sale of new U.S. securities.
Traders said the market generally was positioning itself to deal with the $27 billion in new notes and bonds to be auctioned next week by the Treasury.
The size of the sales, which are part of the Treasury’s regular quarterly refunding operation, was larger than many market analysts had projected. Bond prices dipped following the late Wednesday announcement outlining the sale amid uncertainty over how well the market would absorb the flood of securities.
Ward McCarthy, senior money-market analyst for Merrill Lynch Capital Markets, said most of Thursday’s activity was professional trading, with price declines coming in thin markets.
The drop in prices--which move in the opposite direction of interest rates--could help stimulate demand by foreign investors for the new Treasury securities, traders said. Other analysts noted that demand could strengthen if U.S. unemployment figures for April, scheduled to be released today, indicated continuing economic sluggishness.
In the secondary market for Treasury bonds, intermediate maturities fell in the range of 3/16 to 17/32 point and long-term issues fell by as much as 1 1/16 point. Short-term governments were down 1/16, according to the investment firm of Salomon Bros.
In trading among tax-exempt municipal bonds, general obligations were down 1/2 and revenue bonds fell 3/8 point in moderate trading.
