Favorable Economic News Fails to Spur Stocks; Dow Falls 14.88
The stock market fell to a five-week low Friday, mustering no response to favorable economic news.
Analysts said Thursday’s selloff and the pending expiration of options and futures on stock indexes had put traders in a wary mood.
The Dow Jones average of 30 industrials dropped 14.88 to 1,759.80, bringing its loss for the week to 29.63 points.
Volume on the New York Stock Exchange slowed to 113.54 million shares from 131.57 million on Thursday.
In the bond market, prices fell for the second straight day as investors became increasingly convinced that the Federal Reserve Board is unlikely to push interest rates lower in the immediate future.
Before the market opened, the Labor Department reported that the producer price index of finished goods dropped 0.6% in April, extending its decline in recent months.
Lingering Effects From Thursday
The figures came as new evidence that more positive news on inflation at the consumer level is likely in the future.
Meanwhile, the Commerce Department said housing starts hit an annual rate of just over 2 million units last month. Housing starts have been one of the few bright spots in the economy of late.
But with that favorable background, the market still seemed to be suffering from the aftereffects of Thursday’s decline, which sent the Dow Jones industrial average down 33.60 points.
Brokers also said traders were proceeding cautiously with May options and futures on stock indexes approaching expiration. On some past expiration Fridays, stock prices have been highly volatile as professional traders conducted maneuvers involving the futures or options and individual stocks. On this occasion, however, there was no wild activity as the market reached the close.
Securities industry stocks were mostly lower. Salomon Bros. dropped 1 to 49 7/8, Morgan Stanley 2 1/8 to 73 3/8, First Boston 5/8 to 51 1/2 and Paine Webber 5/8 to 34 7/8. An exception was Merrill Lynch, up 3/4 at 35.
Storage Equities Drops
Losers among the blue chips included International Business Machines, down 1/2 at 144 7/8; McDonald’s, down 1 7/8 at 101 1/2; Minnesota Mining & Manufacturing, down 1 at 99 5/8, and General Electric, down 3/8 at 75 5/8.
Storage Equities suffered the day’s biggest percentage loss among NYSE issues, tumbling 3 to 15 7/8. The company said it planned to cut its quarterly dividend, starting in September, from 48 cents to 35 cents a share.
Gould Inc. fell 2 1/8 to 23 3/8 as directors voted to suspend the dividend.
Viacom International dropped 2 7/8 to 62 5/8. Financier Carl C. Icahn has said he is prepared to take over the company for $75 a share, but Wall Streeters expressed doubts that the deal would ever come to fruition.
In the daily tally on the Big Board, about five issues declined in price for every three that gained ground.
In the credit markets, the Treasury Department’s key 30-year bond dropped about $7.50 for each $1,000 in face value, after having declined about $12 on Thursday. Its yield rose to 7.63% from 7.57% on Thursday.
Analysts said the unexpectedly large $6.1-billion increase in the nation’s money supply, which depressed the credit markets late Thursday, continued to play a significant role.
Henry Kaufman, senior economist at the New York investment firm Salomon Bros., predicted that the Fed’s policy-setting Federal Open Market Committee will not change its position on interest rates when it meets Tuesday. But he also said the committee will not necessarily worry over the rapid expansion in monetary growth.
In the secondary market for Treasury bonds, prices of short-term governments fell 5/8 point, intermediate maturities about 1/2 point and long-term issues were down about 3/4 point.