Dow Falls 12.65 as Investors Eye Interest Rates

The stock market gave ground Wednesday as investors cautiously watched for signals on the outlook for interest rates.

A selloff in International Business Machines shares contributed to the wary mood on Wall Street. But the market nevertheless managed to close well above its midday lows.

The Dow Jones average of 30 industrials, down almost 30 points at one stage, finished with a loss of 12.65 at 1,775.30.

Volume on the New York Stock Exchange came to 129.89 million shares, against 121.18 million on Tuesday.

Analysts said traders were preoccupied with the Treasury Department’s sale of $27 billion in bonds and notes, which got off to what was described as a lukewarm start on Tuesday and continues through today.

There was some unhappiness on Wall Street over provisions of the tax bill passed by the Senate Finance Committee that would eliminate tax breaks for long-term capital gains and curtail the tax advantages of individual retirement accounts.

Some Benefits in Plan

But brokers also noted that by lowering the maximum general tax rate to 27%, the measure would reduce the tax burden on short-term gains, which now are subject to the ordinary-income levy of as much as 50%.

International Business Machines dropped 3 to 151. Morgan Stanley lowered its earnings estimates for IBM for this year and next.

Among other computer stocks, Digital Equipment lost 2 1/2 to 173 7/8, Data General 1 1/8 to 40 and Prime Computer 3/4 to 21.

The Senate committee tax proposal prompted some selling of the stocks of brokerage firms and mutual fund managers, which have sought to benefit from the boom in IRA investing.

Dreyfus Corp. dropped 4 3/4 to 87 7/8, Merrill Lynch 1/8 to 37, E. F. Hutton 1/2 to 38 1/8 and Paine Webber 3/4 to 37 1/2.