Stocks Fail to Sustain Rally; Dow Slips 8.81
Stock prices turned downward in continued quiet trading Wednesday after the rally that began in the previous session faded.
Many retailing stocks bucked the down trend.
The Dow Jones average of 30 industrials, up 25.80 on Tuesday, dropped back 8.81 to 1,775.17.
Volume on the New York Stock Exchange came to 117.09 million shares, up from 112.99 million on Tuesday.
Stock prices began to climb Tuesday as open-market interest rates and oil prices fell. On Wednesday, investors were confronted with some fresh favorable news on inflation.
The Labor Department reported that the consumer price index fell 0.3% in April. Together with declines of 0.4% in February and March, that marked the first time that the index has dropped for three consecutive months since 1952.
Still, many Wall Streeters were skeptical about the durability of the market’s rise. They noted that it took place on relatively light volume and did not engender pervasive buying throughout the market.
Questions About Growth
Questions persist about the pace of economic growth in the months ahead. Figures published Wednesday by the Commerce Department on consumer income and spending for April indicated that Americans continued to increase savings, as they have been doing for several months now.
Nevertheless, the increase of 1.2% in personal income, helped by higher subsidy payments to farmers, came in above expectations, and stocks of general-merchandise and some specialty retailers were strong.
J. C. Penney gained 3 1/2 to 79, K mart 3/4 to 51 3/4, F. W. Woolworth 2 1/2 to 86 1/2, Sears, Roebuck 1/2 to 45 3/8, Allied Stores 2 5/8 to 45 and Petrie Stores 1 7/8 to 33 5/8. The retailers are also seen as potential beneficiaries of the tax overhaul plan approved early this month by the Senate Finance Committee.
Computer and technology issues, by contrast, were broadly lower. International Business Machines dropped 1 3/4 to 144 1/2, Digital Equipment 1 to 87 1/8, Hewlett-Packard 1 to 43 and Data General 1 to 40 5/8.
C. H. Masland & Sons, an American Stock Exchange issue, jumped 27 7/8 to 66 1/2. Burlington Industries proposed a $68-a-share takeover of the company.
Home Shopping Network, also traded on the Amex, fell 1 to 59 1/8. The exchange effectively barred any new margin buying of the stock, which has soared since the company went public last week.
Margin is money borrowed from brokers, usually by speculators who want to enhance their potential rewards in an investment while taking a commensurate increase in risk.
Bond Prices Mixed
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,354, compared to 2,225 on Tuesday.
In the daily tally on the Big Board, declining issues slightly outnumbered advances.
In the bond market, prices seesawed, buoyed by the dollar’s strength and a fresh decline in oil prices but depressed by profit taking and technical factors that left many issues lower for the day.
The Treasury Department’s key 30-year bond, which rose $20 for each $1,000 in face value during a rally Tuesday, declined by about $5, with its yield rising to 7.59% from 7.55%.
Marshall B. Front, economist at the Chicago investment and mutual-fund management firm of Stein Roe & Farnham, said the inflation news, combined with the dollar’s recent strength in foreign exchange markets, “should give the Fed a little more leeway in being more accommodative.”
Fed Chairman Paul A. Volcker has expressed concern about the dramatic decline of the dollar over the past six months, particularly against the Japanese yen, contending that it may compel foreign investors to take their money abroad and may cause inflation by raising the price of imports.
Ryland Chase, senior vice president at the New York investment firm Bull & Bear Group, said the market was characterized by “a tremendous amount of volatility.”
He also said some investors were nervous because of rumors that a few dealers have sustained large losses in government bonds recently. The Treasury auctioned $27 billion in new notes and bonds earlier this month, and the market has taken a while to absorb them.
In the secondary market for Treasury bonds, prices of short-term governments were unchanged, intermediate maturities fell about 3/4 point and long-term issues were down 1/2 point, according to the investment firm of Salomon Bros.
In corporate trading, industrials and utilities rose point in quiet dealings. Among tax-exempt municipal bonds, general obligations fell 1/2 point and revenue bonds were down point. Trading was light to moderate.
