Dow Off 17 as Energy Issues Lead the Decline
The stock market posted a broad loss Wednesday as traders looked ahead warily to the “triple witching hour” at the end of the week.
Energy stocks recorded some of the most notable losses in a session of moderate trading activity.
The Dow Jones average of 30 industrials, which had risen 23.90 points on Monday and Tuesday, fell back 17.85 to 1,918.31.
Volume on the New York Stock Exchange came to 148.84 million shares, down from 157.04 million on Tuesday.
This Friday marks the last trading in a series of stock-index futures, stock-index options and options on individual stocks.
Such occasions in the past have often produced turbulence in the stock market, with no predictable pattern. This time around, there has been talk on Wall Street that the market might be vulnerable to a selloff at the close on Friday.
Despite that speculation, stock prices were able to stage rallies in late trading in both Monday’s and Tuesday’s sessions. But they failed to muster a repeat performance in Wednesday’s trading.
In the economic news, the Commerce Department reported that the gross national product grew at a 2.8% annual rate, after adjustment for inflation, in the third quarter. GNP growth for the July-September period had previously been estimated at 2.9%.
Little Response to GNP News
Brokers said the small revision elicited little response from the market, particularly at a time when traders were preoccupied with matters having little to do with the behavior of the economy.
The energy stocks took a tumble as market participants evidently grew uneasy waiting for any further signs of progress by the Organization of Petroleum Exporting Countries toward production-limiting agreements intended to bolster world oil prices.
Exxon dropped 1 to 71 5/8, Chevron fell 1 3/8 to 46 3/8, Amoco was off 1 at 66, Atlantic Richfield 1 to 59, Texaco fell 1/2 to 35 and Mobil was down 3/8 at 39 7/8.
General Motors fell 1 to 68. The company said it disagreed with a brokerage firm’s reported reduction of its earnings estimates for GM in 1987 and 1988.
Lear Siegler jumped 14 1/8 to 89 5/8 in active trading. The company agreed to be acquired by an investment group for $92 a share in cash.
Pan Am Corp., fell to to 4 in active trading. A Morgan Stanley & Co. analyst recently issued a negative report on the ailing carrier. Analysts said a source of concern about the company is that it is close to using up the proceeds of the sale of its Pacific routes to United Airlines. Stop & Shop Cos. climbed 2 5/8 to 54 7/8. The company said it knew of no reason for the increased activity, which was apparently sparked by takeover speculation.
Declining issues outnumbered advances by nearly five to two in the daily tally on the Big Board, with 472 up, 1,143 down and 425 unchanged.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 174.93 million shares.
Standard & Poor’s index of 400 industrials fell 2.79 to 275.29, and S&P;'s 500-stock composite index was down 2.48 at 247.56.
Bond Market Quiet
In the credit markets, bond prices were little changed in lackluster trading Wednesday as investors’ attention focused on the holiday season and away from financial matters and OPEC’s production-cutting talks.
The Treasury’s bellwether 30-year issue inched up 1/16 point while its yield dipped to 7.37% from 7.38% on Tuesday, according to Telerate Systems Inc.
Analysts said the market had a slight positive reaction to the decline in oil prices following the stalled talks by OPEC oil ministers in Geneva aimed at raising crude prices.
Iran’s national news agency reported that the Tehran government was urging the Organization of Petroleum Exporting Countries to suspend Iraq’s membership for refusing to join in proposed oil production cuts.
On the New York Mercantile Exchange, the January contract for West Texas Intermediate, the benchmark U.S. crude, closed down 24 cents at $15.86 a barrel.
Increases in oil prices over the past several days had sent jitters through the credit markets, with some traders worried that the rise could be a harbinger of renewed inflationary pressures. Higher inflation lessens the attractiveness of fixed-income investments, especially long-term maturities.
In the secondary market for Treasury securities, short-term governments were off 1/16 point, intermediate maturities ranged from up 1/32 point to down 1/32 point and 20-year issues were off 1/16 point, Telerate said.
In corporate trading, industrials were unchanged and utilities were up 1/8 point in quiet dealings, according to the investment firm of Salomon Bros.
Among tax-exempt municipal bonds, general obligations were unchanged and revenue bonds rose point in light trading, Salomon Bros. said.
Interest rates on short-term Treasury bills rose slightly, reflecting the continued high level of the federal funds rate.
Yields on three-month Treasury bills were up 4 basis points at 5.59%. Six-month bills were up 5 basis points at 5.60%, and one-year bills rose 2 basis points at 5.56%, according to Telerate.
A basis point is one-hundredth of a percentage point.
The federal funds rate, the interest on overnight loans between banks, traded at 7.25%, up sharply on technical factors from 6.25% on Tuesday.