Wave of Selling Sinks Stocks; Dow Falls 61.87 : Closely Watched Index Suffers Largest One-Day Point Loss in History
Stock prices took a record-setting drop today in selling touched off by economic worries and bearish statements by some prominent analysts.
The Dow Jones average of 30 industrials fell 61.87 to 1,839.00, exceeding its previous record point loss of 45.75 points on June 9 of this year.
Far greater percentage declines than today’s 3.25% have occurred in the past, when the average was at much lower levels. But that was small consolation to traders counting up their losses today.
Declining issues outnumbered advances by about six to one on the New York Stock Exchange. Big Board volume totaled 138.23 million shares, against 108.26 million in the previous session.
The NYSE’s composite index dropped 4.25 to 140.42. At the American Stock Exchange, the market value index was down 7.88 at 276.71.
Analysts said traders apparently returned from the long July 4 weekend in an uneasy mood over evidence of continuing weakness in the economy.
A monthly survey conducted by the National Assn. of Purchasing Management found declines last month in production, employment and new orders. The trade group’s composite index recorded its sharpest decline in nearly 2 1/2 years.
Sluggish Business Activity
For much of the time lately, brokers have been talking of sluggish business activity as a plus for the market in the sense that it seems to increase the likelihood of another cut in the Federal Reserve’s discount rate. But today observers said concern was mounting that a discount rate cut had already been so widely forecast that the prospect had been fully taken into account by the market.
Adding to the market’s weakness was the news that two well-known analysts--John Mendelson of Dean Witter Reynolds and Robert Prechter, publisher of an investment advisory service--had turned negative on the outlook for stocks.
Long-term government bond prices climbed early today amid rising expectations that the Federal Reserve Board will drive down interest rates. The rest of the market displayed modest strength.
The closely watched 30-year Treasury bond gained 9/16 point, or about $6.25 for $1,000 in face amount, from Thursday’s 1 p.m. EDT close, and its yield fell to 7.13% from 7.18%. There was no trading Friday in observance of Independence Day.
Optimism about a rate reduction has spread due to evidence of economic malaise. The hope is that the Fed will try to restore the economy’s health by cutting the discount rate.
The Fed may have resisted the move up to now for fear that a unilateral reduction by the United States would sharply lower the value of the dollar against the Japanese yen and other major currencies.
There was little immediate reaction to the Supreme Court ruling today against a provision of a law that mandates a balanced federal budget by 1991. Most financial analysts have said such a decision would cause only a temporary setback to the congressional efforts to shrink the deficit.
