Stock Skid Slows; Dow Drops 2.96 : Jitters Over Economy, Mexican Debt Depress Market
The stock market posted a broad decline Tuesday but braked from its record drop of the previous day.
The Dow Jones average of 30 industrials, down more than 16 at one point, finished 2.96 lower at 1,837.19. In the broader market, losers outnumbered gainers by more than three to two among New York Stock Exchange-listed issues.
The Dow industrial average suffered a record 45.75-point loss Monday in a selloff that analysts said was sparked by profit taking and heightened by computer-driven program trading linked to stock index futures and options.
As on Monday, Wall Streeters on Tuesday remained concerned over whether recent mixed economic data signaled an economic rebound later this year and whether interest rates and inflation had bottomed out.
“People don’t know what’s happening because of the weakness in bonds, uncertainty over the economy and questions about tax reform,” said Hildegard Zagorski, market strategist for Prudential-Bache Securities in New York.
Further uneasiness stemmed from doubts over Mexico’s ability to make billions of dollars in debt payments to U.S. banks. The steep fall in the price of oil--which provides 70% of Mexico’s foreign exchange revenue--and the drop in the value of the peso have crimped Mexico’s ability to come up with foreign currency to pay its debts.
Late in the day it was revealed that Federal Reserve Board Chairman Paul A. Volcker had traveled to Mexico on Monday to meet with top Mexican finance officials. Although the topic of discussion was not disclosed, Volcker has been a key figure in past attempts to give debt relief to developing nations.
Financial services stocks generally were lower amid concerns about Mexico and the sentiment that interest rates may have bottomed out. Citicorp dropped 3/4 to 57 5/8, J. P. Morgan fell 2 1/2 to 82, Chemical New York lost 3/8 to 50 and Manufacturers Hanover fell 1 1/8 to 48 5/8.
John Blair & Co. was up 1 1/8 to 29 5/8 in active trading. Macfadden Holdings on Tuesday sweetened its $25-a-share cash tender offer to $30 a share for up to 8 million outstanding Blair shares.
Anderson, Clayton & Co. rose 1 1/8 to 54 1/2. The diversified company is the object of a takeover bid by Bear, Stearns & Co. and Gruss & Co.
Among actively traded blue chips, American Express was down 1 to 59 1/8, Eastman Kodak fell 3/8 to 59 3/8, Sears, Roebuck dipped 1/2 to 46 and McDonald’s fell 3/8 to 100 5/8. U.S. Steel was up to 21 3/8. IBM rose 1 5/8 to 148 3/8.
The initial offering of Pannill Knitting led the list of most active NYSE issues, trading at 23 1/8 with 2.65 million shares changing hands. Big Board volume totaled 125.02 million shares, against 123.33 million on Monday.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 144.63 million shares.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,163, compared to 1,946 on Monday.
Bond prices were mixed in quiet trading. Although in early trading bonds had continued their slide begun Monday, the market rallied off its lows later in the session.
The benchmark 30-year Treasury bond gained 3/16 point Tuesday following a plunge of a full point--or $10 for each $1,000 in face amount--on Monday. The yield for the bellwether issue edged down to 7.75% from 7.77%.
In the secondary market for Treasury securities, prices of short-term governments were unchanged to 1/16 point higher and intermediate maturities ranged from down 3/32 point to 1/2 point higher. The 20-year Treasury bond was up by 1/2 point, according to the investment firm of Salomon Bros.
In the corporate market, industrials were unchanged and utilities were up in light activity. Among tax-exempt municipal bonds, revenue bonds were down while general obligations were up point in light trading.
Yields on three-month Treasury bills fell four basis points to 6.27%. Six-month bills were down two basis points to 6.37%. One-year bills dipped one basis point to 6.44%.
The federal funds rate traded at 6.75%, compared to 6.875% late Monday.