Dow Falls 14 as Interest Rates Move Higher
The stock market lapsed into a broad decline Monday in selling attributed partly to rising interest rates.
The Dow Jones average of 30 industrials, which had risen almost 117 points over the past two weeks, dropped back 14.76 to 1,861.95.
Volume on the New York Stock Exchange slowed to 120.59 million shares from 151.20 million on Friday.
Analysts at several brokerage firms lately have begun to question whether the long decline of interest rates is at or near its end.
After rising last week, open-market money rates climbed again Monday, pushing prices of long-term government bonds down about $20 for every $1,000 in face value.
Fears of higher interest rates also touched off selling of stock index futures contracts. And, as prices of those contracts slumped, they triggered computerized program trades by Wall Street professionals, buying the futures and selling “baskets” of individual stocks.
Bank Stocks Broadly Lower
In Monday’s economic news, the Commerce Department reported that factory orders rose 0.1% in April, their first increase since January.
Among the blue chips, McDonald’s dropped 7/8 to 101 3/4, American Telephone & Telegraph 5/8 to 24 3/8, Minnesota Mining & Manufacturing 2 to 105, International Business Machines 1/8 to 152 and American Express 1/2 to 62.
Money-center bank stocks were broadly lower. Manufacturers Hanover lost 1 7/8 to 52 3/4, Citicorp 1/2 to 61 1/2, Chemical New York 1 to 52 3/8 and Chase Manhattan 1 to 42 1/2.
In the savings and loan sector, which is also sensitive to changing interest-rate expectations, Far West Financial lost 1 3/8 to 15, Great American First Savings Bank 1 to 17 5/8, H. F. Ahmanson 1 to 63 1/2 and Great Western Financial 7/8 to 38 7/8.
Merrill Lynch, authorized by directors to buy back as many as 5 million shares over the next several years, bucked the general down trend with a 3/4 gain to 37 3/8.
Bond prices fell sharply as investors continued to worry about the possibility of higher interest rates, analysts said.
Late in the day, the federal funds rate traded at 7.125%, up from 6.75% late Friday.